Long Term Family Wealth.

7 Replies

Hi BP,


Looking to keep an elder family members property in the family as opposed to selling right away and 'killing the golden goose.'  It has been hard to get other members on family on board.  Does anyone have an easy read / article / video / podcast they would recommend showing the power of real estate investing leading to generational wealth?

Thanks in advance,

Jim

Originally posted by @Jim Sestito :

Hi BP,


Looking to keep an elder family members property in the family as opposed to selling right away and 'killing the golden goose.'  It has been hard to get other members on family on board.  Does anyone have an easy read / article / video / podcast they would recommend showing the power of real estate investing leading to generational wealth?

Thanks in advance,

Jim

 This might be a losing battle. If you want the property, I suggest you look at it from the perspective of an investor. Would this property make a good long term investment? If you were to buy out the other family members, would this be profitable?

Do not become emotionally attached to it because of old memories.

I'm going to echo what Anthony said; too often what people think is a golden goose turns out to be a turkey, but their "rose tinted glasses" prevented them from seeing the truth. I once had a neighbor who moved to Arizona and, against my advice-he knew I'd been an investor for 30+ years, decided to rent his house. IIRC he was getting about $1100/month for a place that was worth about $190K. I tried to point out that this was a bad investment even if he lived nearby but a terrible investment for someone 1,000 plus miles away. He insisted that he wanted to keep it because "his kids had grown up there" (not a good reason) and "there will be good tax advantages to ownership" (if you consider losing money a "tax advantage" you are a sucker, and tax advantages when his kids inherit. ?? No more so than any other investment. Also he would be leaving his 3 kids each an undivided interest in it.

He lost money for about 3 years, got lots of complaints from the HOA about lack of yard upkeep and 5 cars parked in the driveway/yard. Finally he got fed up and sold it. Having to decide between spending a couple of thousand to get the house ready to sell, clean up, fix up, paint up, he listed it without ever coming back to look the place over. Houses in this area have a typical DOM of less than 10 and sell at asking price. His sold in about 8 weeks and for $15K less than asking.

So much for preserving the family homestead!

@Anthony Gayden

@Frank Adams

Appreciate it guys -   fancy myself as a head thinker not a heart thinker when it comes to real estate but I may be off here.

Main kicker is the estate would have to pay about 80K in cap gains tax post sale.

Long term plan would be to rent both units for 12 months.  Sell - 1031 tax exchange profits into larger investment.

Quick numbers:

Total rent/ mo : $3,300 safe - also 2 garages for potential of more income.

Total Monthly Costs: $1760

 P+I : 0

Taxes + insurance: 550

Landscape / snow: 150 

Water/Trash         :130

Prop Mangmnt:  330

R/M                   : 300

Vacancy (the 1 bedroom has never had over a month vacant in the 40 year she has owned it. )                    :  300

Obviously I don't know the history of the ownership but why do you think there would be capital gains? There would be a step up in value at the time of death of the owner.

@Frank Adams   -- The trust she has the property in owns the home.  Thus canceling any chance of the 250K owner occupied break.... 

I have no interest in keeping the property and it has no sentimental value to me... but renting it out and or selling and trading up has to be a better play than selling and taking 80+K in tax bath...

Jim Sestito, you said it again; 

"Main kicker is the estate would have to pay about 80K in cap gains tax post sale." So the gain is in the $530,000 range?

When you say "estate" to me that means that the owner has passed on. I'm not sure what a trust has to do with the rules of descent and distribution (I'm not a lawyer, but I did inherit from a trust once) but why wouldn't the heirs get a step up in value?

Originally posted by @Frank Adams :

Jim Sestito, you said it again; 

"Main kicker is the estate would have to pay about 80K in cap gains tax post sale." So the gain is in the $530,000 range?

When you say "estate" to me that means that the owner has passed on. I'm not sure what a trust has to do with the rules of descent and distribution (I'm not a lawyer, but I did inherit from a trust once) but why wouldn't the heirs get a step up in value?

If people hold their real property until death and don't get all sophisticated with transfers, the heirs will inherit at current market value or 'stepped-up' basis.  No gain if sold at time of death or even if sold later at the TOD market value.  Just echoing Frank's point.   

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