These parents are buying homes for their kids…with strings attached

[Luvtoride]

Good article referenced in today’s Brew Markets, my daily read on the stock market and economic activity at the end of each trading day.

“Young people are locked out of the housing market, so their parents are buying them homes. It can get messy fast.”https://links.morningbrew.com/c/PT5...887c4dbc5bc0b&mbuuid=VHi25eNUQtXbwLvBgArWSgvi

I hope the link works to read the article. I imagine this might be a popular topic here as many of us Boomers try to help our Millennial offspring buy homes to stay “close by”.

Does this resonate with anyone here? Mine are a bit older and already own homes, but with the costs of houses (and condos) and interest rates now, it must be getting harder to afford a home.

 

[TripleLindy]

I read that article in the WSJ, too. We’ve helped all 3 of our kids buy homes, mostly for the same reasons noted by those interviewed, although we didn’t attach any strings, like staying close. We decided it would be better to let the kids enjoy part of their inheritance now instead of waiting until we’re gone. That’s as much for us as it is for them. Win-win in our books.

 

[Aerides]

the main family featured have a "string" that they live no further than 2 miles from their dad. He's a widow, so that's a unique situation. Also dad owns the mortgage, so daughter isn't getting anything other than good rent. He bought a house for her to live in, he didn't buy her a house (unless he's deeding the title at some point? No mention of that).

In most cases, that comes across as controlling. Buy the house, but don't add strings!

And yes, DH bought our current home for about 180k in 1999. Today we'd sell for close to 1M. This is a SFH, not some big place at all. First time home buyers with decent incomes cannot do what we were able to do.

 

[JBTX]

Very recently the house next door went up on the market. I was very close to buying. Had engaged broker and put in a bid. Would have been there for adult daughter with mental health issues - who we typically pay for her rent elsewhere, and / or eventually for our disabled adult son, who only recently moved to a group home out of town.

I even started a thread on Bogleheads about it.

I ultimately backed out. It was attractively priced and had multiple offers within 2-3 days of listing. There were two many variables in both my daughters and sons situation to buy now as it very likely would have sat empty for some amount of time.

For various reasons it is likely best it didn’t happen.

In the future may I try again? Possibly but things would need to stabilize before I did such a thing.

 

[MC Rider]

The main family featured have a "string" that they live no further than 2 miles from their dad.

Being stubborn and independent all I probably would have rejected that string.

 

[YellowSubmarine]

We were very nurturing and stern parents. We were given nothing, self made and that was instilled in our boys. Happy to say, both married Sons acquired very nice homes prior to age 30. After college, they never asked or expected any further assistance. I do respect the folks that elect to share the future inheritance in a most enjoyable, meaningful manner. I would do the same if that became relevant. fwiw...both families live a distance from us; but we took the self reliant approach to child rearing, never hovering or clipping the wings during child development.

 

[badatmath]

the main family featured have a "string" that they live no further than 2 miles from their dad. He's a widow, so that's a unique situation. Also dad owns the mortgage, so daughter isn't getting anything other than good rent. He bought a house for her to live in, he didn't buy her a house (unless he's deeding the title at some point? No mention of that).

In most cases, that comes across as controlling. Buy the house, but don't add strings!

And yes, DH bought our current home for about 180k in 1999. Today we'd sell for close to 1M. This is a SFH, not some big place at all. First time home buyers with decent incomes cannot do what we were able to do.

Depends where you live. I got a cheap house that has not gone up even 1/4 of that much in ~ 25 years. It was a terrible decision the worst one I've ever made actually.

 

[silvor]

Depends where you live. I got a cheap house that has not gone up even 1/4 of that much in ~ 25 years.

Don’t feel bad. I made 1.7% annual over 23 years on my place. On the edge of a growing suburb too.

 

[RunningBum]

When my son was just a couple years out of college and his wife was starting grad school, I bought a condo for them to use. I did not charge rent. Not sure of the legality but I treated it as a second home of mine that I let them stay in. I sold it long enough ago (at a small gain) that I'm not worried.

They divorced, and son took a new job in a new town, and after a year or so of apartment living he wanted to buy a house. I had been gifting him the max to not have to report, and he had been saving it so he didn't need additional help. 2 5/8% mortgage didn't hurt at all! So that worked out well. He was responsible about the gifts, invested it well, and used it for a 20% down payment.

 

[Jerry1]

I bought one of my daughters a house and one got her four years of college paid for. Both pretty close in cost (15+ years ago). At first we had our name on the house with just our daughter. She had just got married and we wanted to protect the asset in case of a divorce. Turns out SIL is a great guy and combine that with the desire to limit our liability, we signed the house over to them fully. There were no strings attached but we actually did move closer to them so we could spend more time with them including the grandkids. It’s their house now so if they wanted to move or do anything else with it, we’d be fine with whatever they decide.

 

[donheff]

I helped both kids with down payments. No strings attached. My daughter likes her house for now but is sort of trapped by a 2.65% mortgage.

 

[Music Lover]

In most cases, that comes across as controlling. Buy the house, but don't add strings!

Or, don't accept the money if you don't want the string.

 

[planuntilthefisthits]

I live in a high cost of living area. A guy I know bought a home for his twin daughters a few houses way from him. He wanted to age in place and the house for his daughters was part of his LTC plan.

 

[TripleLindy]

She had just got married and we wanted to protect the asset in case of a divorce.

This was a concern of ours, too, but the funds were a gift and we didn’t attach any strings. Once the gifts were given, it was out of our hands and the funds became their responsibility to manage appropriately.

 

[Kings over Queens]

I hope the link works to read the article. I imagine this might be a popular topic here as many of us Boomers try to help our Millennial offspring buy homes to stay “close by”.

Does this resonate with anyone here? Mine are a bit older and already own homes, but with the costs of houses (and condos) and interest rates now, it must be getting harder to afford a home.

It resonates, but for different reasons. I'm not partial to having our kids stay close but welcome it if they do. They need and should live their owns lives.

While not a purchase for them, I hope to fund interest only "interfamily" mortgages for them with the only strings attached is that they take what they would have paid to us as principal and instead invest in ETF's. My goal is to help them create wealth and transfer what we've earned smartly. I'll figure out some gifting schedule at some point. I'm not ready to just gift them that much money, and I don't think they'd want it as a gift. This is a happy compromise. They get a low interest loan at very favorable rates and we get some interest income.

 

[Luvtoride]

Kings that sounds like a good approach but WILL they decide/ be able to invest the principal in an ETF? Will you need to direct/ coax them to go that route? I guess if it’s not a requirement to the loan/ help then it’s not a string attached. Hope it all works out!

 

[Kings over Queens]

Kings that sounds like a good approach but WILL they decide/ be able to invest the principal in an ETF? Will you need to direct/ coax them to go that route? I guess if it’s not a requirement to the loan/ help then it’s not a string attached. Hope it all works out!

Investing the principal isn't an option, it's 100% a string or condition of the loan. My hope is to help them get into a house they can afford while not depleting their brokerage accounts for a down payment and for them to continue saving/investing aggressively.

Rather than pay us back the principal on a monthly basis, which doesn't help them from an investment standpoint, they will invest in QQQ or VOO or whatever low cost index they like. Instead of paying us, they invest that portion, and in doing so, they will make more money in gains investing the money then they would paying us back. The house will appreciate over time as well.

So yeah, a string, but clearly for their benefit. I could do better by leaving the money in my brokerage account but that doesn't help them today.

 

[Luvtoride]

Kings, here here! Exactly the philosophy of Die with Zero. Use your assets / wealth to help your heirs NOW when they can most use it than much later when you are gone. Well done

 

[flyoverstate]

Depends where you live. I got a cheap house that has not gone up even 1/4 of that much in ~ 25 years. It was a terrible decision the worst one I've ever made actually.

I have relatives in the Midwest whose houses were worth *less* than they paid for them after 15 years, right up until 2021 or so. Now they are up about 25%. After 20 years!

 

[FIREd]

My sister has been living for almost 20 years in a condo owned by my father. She pays rent, about 1/3 the going rate in the area (rents are crazy high here). It comes with some strings attached and in the end there has been resentment on both sides. I’m glad to stand on my own two feet financially and owe nothing to no one.

 

[Amethyst]

The parents in these cases are trying to control their kids through the "free" house. Better to scrape, scrimp, do without, and get out on one's own. But then it doesn't appear that the latest crop of homebuyers are the scraping/scrimping type.

 

[Texas Proud]

Well, I am going to 'own' half of a condo while my daughter goes through graduate school...

Not a deal breaker either way as it is cheap... but will make her pay all fees etc... no strings attached until she sells and I get my money back...

 

[richardsok]

Don’t feel bad. I made 1.7% annual over 23 years on my place. On the edge of a growing suburb too.

I can beat that. When my daughter graduated from Penn State ( 100% paid by me) she was struggling to pay her rent. I was partly to blame, insisting that she live in a safe downtown Philadelphia neighborhood. After a couple of years of this, I decided what the heck. (She's going to wind up with my money anyway.) I went out (unknown to her) and bought a lovely little downtown loft condo with big windows & deeded parking. (My name on the deed). My thinking -- she'll get married in a couple of years, no doubt, so I can make her single life safer & easier for her -- while it lasts.

Well, we gave her a big surprise party Christmas Eve in the unit and she got the key on a pretty red bow. She was 26 years old at the time. Happy day, yes?

(Me and my big plans....)

Fast forward: she's 41 now -- STILL single, STILL living in the same damn unit and (worse yet) Philly's real estate market is comatose. In 15 years the unit hasn't appreciated a bit. Zilch. Zero. Nada. Get the drift? And it's TOO nice. Even if she wanted to move, she couldn't afford the higher end freight. So I'm stuck.

Last year I got fed up and announced to my wife (not my daughter's mom) I was going to charge the kid rent. Well, we had SUCH a fight. Wife's position: you gave the unit to your daughter as long as she wanted to stay there. There was no exit date when you handed her the key. Fathers may lie, steal, cheat, embezzle, drink, snort or have girlfriends --- but dads MUST keep their word to their daughters! That's the eternal law. (It's written down someplace.)

Like I said: stuck.
.
.

 

[Luvtoride]

All of these are great examples of the perils and pitfalls (and some successes) of “helping” kids with housing. It really can be a slippery slope with or without strings attached. I think the important thing is helping our kids when they need it, without necessarily thinking about the longer term impacts down the road. Hopefully all turns out ok, but clearly that’s not always the outcome.

 

[Sunset]

My sister has been living for almost 20 years in a condo owned by my father. She pays rent, about 1/3 the going rate in the area (rents are crazy high here). It comes with some strings attached and in the end there has been resentment on both sides. I’m glad to stand on my own two feet financially and owe nothing to no one.

She might resent, but not enough to go live somewhere else at full rent/ownership price.