Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Buying Real Estate with Family
Old 04-15-2015, 07:23 PM   #1
Recycles dryer sheets
 
Join Date: Apr 2014
Posts: 227
Buying Real Estate with Family

I have a sister that travels to an island vacation each year. She has two kids and a husband. They don't have debt but they aren't LBYM either. We have flirted with buying real estate on the island and the ROI looks good, around 10 percent net. It would cost $75k each for a 15 year mortgage.

I am single with no kids. Honestly I'm not sure if their marriage will last. Because of this if we bought property I would ask for 51% of the company. Does this sound reasonable? I put the idea to her and she seemed a little dismayed.



I am 32yo and she is 38.



Any thoughts?
__________________

__________________
retirementguy1 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-15-2015, 07:26 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
I wouldn't touch this with a ten foot pole. Not only would you have the hassles of foreign ownership of a vacation property, but there exists a significant possibility of conflict arising from shared ownership.
__________________

__________________
Meadbh is offline   Reply With Quote
Old 04-15-2015, 07:34 PM   #3
Thinks s/he gets paid by the post
RetireAge50's Avatar
 
Join Date: Aug 2013
Posts: 1,120
Oh my goodness do not do it. I purchased property with two of my sisters who then both divorced. Now there is no way to sell unless everyone agrees which will likely never happen.
__________________
RetireAge50 is online now   Reply With Quote
Old 04-15-2015, 08:12 PM   #4
Recycles dryer sheets
 
Join Date: Apr 2014
Posts: 227
The property is in the US. It is a 2bed 2bath condo. On VRBO the property is booked 5 months in advance. My main concern is the ownership structure. I would only be comfortable with a majority ownership. Is there a way to do this? Like voting rights?


If I was close to FIRE I wouldn't take the risk but since I'm 32 I'm more comfortable taking a gamble. If we reinvest the net profits we could pay it off in 8-9 years. I would then have $2k per month in profit.


Thanks for the comments so far.
__________________
retirementguy1 is offline   Reply With Quote
Old 04-15-2015, 08:29 PM   #5
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 16,373
Why don't you just buy it and your sister can rent it every year for her island vacation?
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline   Reply With Quote
Old 04-15-2015, 08:32 PM   #6
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 1,316
Absolutely not. Partnerships with relatives are a recipe for disaster, both family relations and money.

__________________
“The finance industry is 5% rational people and 95% shamans and faith healers.” - Charlie Munger
Lakewood90712 is offline   Reply With Quote
Old 04-15-2015, 08:46 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,422
Quote:
Originally Posted by Lakewood90712 View Post
Absolutely not. Partnerships with relatives are a recipe for disaster, both family relations and money.

C'mon, the OP's asking for advice, quit pussyfooting around and tell him what you think.

Oh yeah, and +1.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers, or maybe Sam Clemens
DW and I - FIREd at 50 (7/06), living off assets
harley is offline   Reply With Quote
Old 04-15-2015, 09:59 PM   #8
Recycles dryer sheets
 
Join Date: Aug 2014
Location: Western Canada
Posts: 393
Quote:
Originally Posted by Meadbh View Post
I wouldn't touch this with a ten foot pole. Not only would you have the hassles of foreign ownership of a vacation property, but there exists a significant possibility of conflict arising from shared ownership.
Your pole is about 11 feet too long.
__________________
I'm not crazy. Honest, the judge had me tested.
Rick_Head is offline   Reply With Quote
Old 04-15-2015, 10:03 PM   #9
Full time employment: Posting here.
Calico's Avatar
 
Join Date: Apr 2012
Posts: 921
Quote:
Originally Posted by Lakewood90712 View Post
Absolutely not. Partnerships with relatives are a recipe for disaster, both family relations and money.

My two cents: I never mix business with family. I've seen too many cases where it ended very badly - and none where it worked out.
__________________
Calico is online now   Reply With Quote
Old 04-15-2015, 10:14 PM   #10
Thinks s/he gets paid by the post
Sunset's Avatar
 
Join Date: Jul 2014
Location: Chicago
Posts: 4,719
Quote:
Originally Posted by Bestwifeever View Post
Why don't you just buy it and your sister can rent it every year for her island vacation?
+1

If its really a good investment, why split the profit ?

Issues I have besides it being with family, is that your entire investment decision is based on the amazing ability of your sister to find the best investment location as her vacation spot. < I'm being sarcastic here >

For all you know, this is the bottom of the possible choices, and certainly I doubt its the top choice for an investment as that is not what drives your sister to pick it for a vacation.
__________________
Sunset is offline   Reply With Quote
Old 04-16-2015, 10:50 AM   #11
Recycles dryer sheets
 
Join Date: Apr 2014
Posts: 227
Thanks for all the input so far. To do it myself I would need $150k which is about half my net worth. That seems like a lot to tie up in one property. On the other hand, with sole ownership my gross would be around 5k once the mortgage is paid off. net would probably be 3.5k
__________________
retirementguy1 is offline   Reply With Quote
Old 04-16-2015, 11:02 AM   #12
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,151
There are lots of costs associated with rental property that is not managed by you. Call a property management company and request a quote and a fee listing. Also, why tie up all that cash making it non-liquid?

The deal with family ownership is fraught with disaster, as mentioned above.
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 04-16-2015, 11:06 AM   #13
Thinks s/he gets paid by the post
ivinsfan's Avatar
 
Join Date: Feb 2007
Posts: 2,198
Quote:
Originally Posted by aja8888 View Post
There are lots of costs associated with rental property that is not managed by you. Call a property management company and request a quote and a fee listing. Also, why tie up all that cash making it non-liquid?

The deal with family ownership is fraught with disaster, as mentioned above.
+1 and just wondering if the rate of return and net income is really that good why is the property even up for sale? I think if after reading all the negative comments about this idea, if you are still interested you need to do a little more due diligence on these numbers.
__________________
ivinsfan is offline   Reply With Quote
Old 04-16-2015, 11:08 AM   #14
Full time employment: Posting here.
 
Join Date: Jan 2013
Posts: 660
Quote:
Originally Posted by retirementguy1 View Post
I am single with no kids. Honestly I'm not sure if their marriage will last. Because of this if we bought property I would ask for 51% of the company. Does this sound reasonable? I put the idea to her and she seemed a little dismayed.
To be quite honest, no it doesn't seem reasonable to me. It sounds as if you are maneuvering to get complete control of the property but are willing to contribute only 50% (or maybe 51%) of the costs. No wonder your sister sounds "a little dismayed" by your suggestion. I would reject the whole idea out of hand if I were in your sister's shoes.

Jointly held investments with close relatives are fraught with peril in the best of circumstances. Your sister's dismayed reaction suggests that you won't be starting out even close to the best of circumstances. This investment has potential disaster written all over it. Either you or your sister should back out of the proposed deal before it goes any farther.
__________________
karluk is offline   Reply With Quote
Old 04-16-2015, 11:16 AM   #15
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,078
Quote:
Originally Posted by retirementguy1 View Post
Any thoughts?
Don't do it. See reasons above.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 04-16-2015, 11:36 AM   #16
Full time employment: Posting here.
 
Join Date: Jul 2014
Posts: 616
So many reasons not to do this!

If it turns out the property needs major repairs, are you sure they have the money for this? What if the two of you have different views on whether certain repairs are necessary? How do you handle if she and her family want to vacation there a lot and you don't? What if they want to use it during some of the highest vacation demands, but you want to travel somewhere else?

What happens if she divorces? Is the money she'd use to purchase clearly her own or would her husband have an interest as well?

What if one wants to sell because they need the money for some other reason including medical expenses, but the other doesn't ? What if one gets sued for an accident?

What other investment opportunities are you sacrificing to participate in this? Is this a good mix with the rest of your portfolio and desired asset allocation?

It could work out great, or it could really impact your relationship with your sister, and that is a risk I wouldn't want to take.
__________________
Katiek is offline   Reply With Quote
Old 04-16-2015, 12:09 PM   #17
Recycles dryer sheets
 
Join Date: Apr 2014
Posts: 227
Well, it looks unanimous. I won't do it. Thanks for all the input. I will maybe travel there later this year and see if I can do it by myself. A big thank you for all the advice and input.
__________________
retirementguy1 is offline   Reply With Quote
Old 04-16-2015, 12:20 PM   #18
Recycles dryer sheets
Willers's Avatar
 
Join Date: May 2013
Posts: 480
A story in case you reconsider later:

My two B'sIL owned a business together. They never had an issue...then they got married. Long story short, the business ended up dissolving and both spouses are still convinced they got the short end of the deal. Family get-togethers have never been the same since.
__________________
“If you don't do it this year, you will be one year older when you do.” - Warren Miller
Willers is offline   Reply With Quote
Old 04-16-2015, 12:37 PM   #19
Thinks s/he gets paid by the post
 
Join Date: Apr 2010
Posts: 1,682
Danger. Just don't do it for a host of reasons.

I have seen firsthand what can happen when family and business relationships become intertwined.
__________________
brett is offline   Reply With Quote
Old 04-16-2015, 01:18 PM   #20
Dryer sheet aficionado
 
Join Date: Feb 2015
Posts: 38
Forgetting all the potential for family drama that has been well documented by others, this would be too large a percentage of your net worth in my estimation. Vacation rentals managed by third parties rarely cash flow, so you would be committing a large portion of your portfolio to no gain or a loss each year from a cash flow perspective.

You also mention if you go it alone, it would be half your net worth. If true, you aren't ready for this much risk in a property you aren't personally managing.
__________________

__________________
beanctr88 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Starting a real estate investment partnership with family... thefed Other topics 26 01-13-2009 03:53 PM
Real Estate Agent in Down Real Estate Market TromboneAl Other topics 4 06-09-2007 11:20 AM
book suggestions on buying rental real estate? madrone FIRE and Money 27 01-27-2006 01:20 PM
Hazards in Buying Foreign Real Estate haha Life after FIRE 12 10-25-2005 10:16 PM
Is it really worth buying a real estate? GTM Other topics 48 01-03-2005 04:25 PM

 

 
All times are GMT -6. The time now is 01:25 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.