Unlocking the Legal Jargon: How AI Legalese Decoder Can Help Parents Decide Whether to Sell or Keep a Second Home
- May 9, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Deciding What to Do with an Inherited Home Worth $500k
My parent, who is 70 years old, inherited a home worth about $500k. The HOA regulations disallow renting, so a family member is currently living there for free. My parent is considering moving into the home when their spouse passes away, and then selling their current “main house.”
The value of the inherited home is increasing at an average rate, but there are annual HOA fees ranging from $3,000-$4,000, in addition to taxes and insurance costs.
Given the limited odds of the spouse passing away in time for my parent to move into the other home while still being in good health, it raises the question of what they should do with the property.
One potential solution could be to sell the house and invest the proceeds in a mix of CDs and bonds. This could provide my parent with more cash on hand to cover expenses related to aging, rather than dealing with the ongoing costs of maintaining the inherited home.
### How AI Legalese Decoder Can Help
The AI Legalese Decoder can assist in this situation by analyzing the legalities surrounding the HOA regulations and any constraints on selling the property. It can provide personalized advice on the best course of action based on individual circumstances and legal implications. Additionally, it can offer guidance on investment opportunities such as CDs and bonds to maximize financial resources for aging care.
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****** just grabbed a
Why isn’t family member paying the HOA fees?
Sounds better to sell..
If you’re interested in trying to rent it, check your local laws. HoAs may have a rule against it, but there also may be a local law saying that HoAs aren’t allowed to make a rule like that. Might be asking for trouble with them in other ways, but you should know all your options.
There’s absolutely no reason to have a deadbeat relative living there rent-free. You absolutely need to unload this house asap.
If your parents had recieved $500,000 would they buy this property? Almost certainly not, right? Maybe they would buy it so the family member can live there. If so, great!
If not, I see a number of options.
(1) Buy a cheaper condo that allows rentals. Let the family member live there and get at least some rent. Put the rest of the money in better investments.
(2) Sell it, evict the family member, invest the money. I don’t know the family member relationship. At this point, under the law, it would likely take 3 months to evict anyway, so maybe give them that warning? Or, if it is really going to be a problem, give a 3 month warning and also give $2,000 so they can pay a security deposit?
(3) At the very least, it seems the family member should be “generously gifting” your parents $500/month to pay for property taxes, insurance and the HOA. At least that way they get the accrued value, and aren’t actively losing money month to month. Like, if they got $400k, and invested at 4.5%, they would be MAKING $18k a year. As it stands, they are losing probably $5k-$7k a year. So, around $24k a year in difference between a very conservative investment at a low sale price and what they are doing.
Family member could have a cancelable private purchase agreement with the owners – should be enough to pay for HOA fees and a modest stipend for maintenance and repairs while living there.
Or (as others have suggested) sell it and put that into VOO or some other low cost ETF tracking the SP500 index.
sell, put the money into a HYSA and CDs and bonds (I’d say S&P, but your parent is 70)
Speaking from experience – maintaining a home no one lives in is EXPENSIVE and TIME CONSUMING and a MASSIVE HEADACHE.
Get out while the gettings good, stick the money in the market and be at peace.
Sell one of the two homes and live in the other. Which one should depend on how each home would accomodate aging people. For example, is there a floor with a bedroom, toilet, shower, and kitchen? If not, that house is not good to age in as mobiliyy decreases.
The money is worth more in an S&P 500 index. The property would go into disrepair and be a money suck
Sell, too much hassle with HOA and upkeep
If they inherited the house then they likely got a stepped up basis, meaning there’s almost no tax consequence to selling. So the question is: If someone handed them $500k would they choose to buy that house? If no, then they should sell.
Sell. Owning property comes with liability. It is also harder to access the money if needed on short notice. She should be simplifying things and reducing possible headaches.
is the HOA house nicer? Why not move into it sooner and rent out their “main” house?
But yeah, they shouldn’t be *losing* money on it from the other family member. It’d be one thing if they were trying or working and not making enough, but my imagination about what “useless” means says throw them out if they’re causing your parent to lose money.
Sell it and buy a vacation home if they want to keep the funds in real estate.
Owning a home you can’t use or can’t generate cash flow is a really bad financial decision that can only be justified by having enough money to not care about money.
Sell it. Houses aren’t made of magic. They need constant cleaning, repairs, and usage. Stagnet/standing water in the plumbing is going to be a breading ground for biofilm type bacteria, something like a small leak left alone for months at a time is going to cause some serious damage and mold as it seeps into the walls. Smoke detector and carbon monoxide detector batteries will fail, and eventually start to corrode through, bugs will get in and start making the house their home. Lots of little things you don’t really think about.
They are missing the growth they’d get by using that equity in other ways. Even a money market fund (little to no risk, very liquid) is paying about 5% now.
The house is all negatives. Depreciation, HOA, uncertain appreciation, family drama, various unexpected expenses, not liquid, etc.
Sell.
Are you sure they don’t allow long term rentals? Some HOAs may only disallow only short term airbnb type of rentals.
Sell the second unrentable house. When spouse dies, sell the big house.
Now the survivor has enough money from two properties to buy the perfect retirement home, whatever that means to her.
Family member can contribute to bills which is not rent. I’d sell. This situation is less than ideal for anyone except the person living there for free. Parent gets the stepped up basis for sale.
Depending on how the family member is treating the property the value may be going down and not up.
Sell and put into 20yr treasuries which yield around 4.7-4.75% right now. That’s 23.5k/yr and it’s not subject to state or local taxes, only federal. If parent is set and spending what I’m guessing is 10k+/yr on family members living rent free then that’s their decision. Alternatively parent can sell and agree to pay family member the value of the HOA, taxes and insurance that they’re already paying but decreasing liability of repairs, risk of lawsuits, etc and pocketing 13.5k
If they inherited 500K would they use it buy a house that they can’t rent?
Sorry OP but reading through your comments it seems like this has nothing to do with financial advice. The deadbeat tenant is actually your sibling so everything else is moot since your parents aren’t going to kick them to the curve. Not sure what you think you’re maneuvering when it’s really not up to you.
Am I the only one here who says to charge rent to the family member anyways? If the person is already living there, cats out of the bag.
The financially smart move is to sell. If the rent-free relative is your brother or sister, though, this may be a tough sell for your parent. And it might be that you have some emotional stake in this, too.
Sell it. Put money in bank at 5% if they need it handy.
Umm…no offence, but they’re 70. Why on earth would they be taking a loss from their income now to accrue capital growth? They’re not in the “capital growth” phase of life.
I would consider moving the “family member” along, selling the main house and moving into the new one. Normally I’d just say sell the new one, but if the long term plan is to move into the new one, why not just on and do that now?
They should care a lot more about cash and income producing assets at this point in their life than they care about capital growth, and they certainly should think long and hard about supporting a deadbeat family member in their retirement years.
At 70 your parent is way past the point where they should be making long term investments.
They should be selling the house, tossing the money into something that at least earns interest to extend how long it lasts, and then enjoying their life.
Sell it. She’s not getting any younger, and there’s no guarantee that there won’t be a stall on the crazy appreciation we’ve seen since the pandemic.
So, let’s do the simple math first. I will assume when they inherited the property it was worth $500k and they could net $500k and do a zero risk investment (HYSA, etc) and get it 5% per year – $25k per year.
Or they can keep the current arrangement— where they carrying costs are probably at least $10k to $20k per year. Property tax, insurance, HOA, some longer term maintenance, etc.
That means the property has to be appreciating at about 7% to 10% per year to end up in the same spot. If the tenant were to pay even these basic costs, it becomes a closer call.
But. Are you ready to kick the freeloading relative out? Or at least require them to cover hoa/property tax/insurance?
On a cash flow basis, the parent will be spending between $1k and $2k out of pocket to hold onto the house.
Sell it. For older people, having their assets more liquid makes more sense and it’s not going to increase in value fast enough. They don’t have time to wait for gains. It’s time to cash out unless something is income producing.
whom ever lives there MUST pay all expenses and upkeep and taxes or sell it
Rule number 1: never, ever do business with family. This includes allowing a family member to be a ‘tenant’, paid or otherwise.
Sell it and let your parents enjoy the proceeds.
Does the HOA allow a “roommate” and for that roommate to pay?
Does the HOA allow family to live there?
Your parent can “live” there and have a roommate. Also, roommates are much easier to evict than tenants.
But as others stated this is a family/domestic issue not a money issue at the moment. The family issue needs to be resolved first.
It is likely cheaper even to sell the home and rent an apartment for the “tenant” to live in.
This really comes down to what is your parent actually willing to do? The sensible answer is to sell the new house or boot the family member out and move in to the new house while renting out the old house/selling the old house. Providing long-term free housing to the family member is a bad idea.
But something tells me that you wouldn’t be asking this question at all if your parent was willing to do that. What do you think realistically your parent is willing to do?
If you sold the house, what would happen to the “useless” family member?
Edit: I didn’t know this sub was so souless
Could this get around the HOA bylaws?
Get a cash-out mortgage on the house. Invest the funds. Offer to let any friends or family live there if they cover the mortgage (which includes taxes & insurance), utilities and HOA fees. House is waiting for you without costing anything while appreciating.
If you can’t make the family member/friend cover the costs then definitely sell.