Hello Everyone,

I will try to keep it as short as possible! Parents own a property in CA. The property is worth about 600k. They owe 217k on the mortgage loan and have about 45k in debt through CC debts and HELOC. They are negative cash flow as they cannot afford to pay debts and living expenses. They have not done a consolidation as they will not get approved and his father has a gambling problem. They once consolidated through a cash out refi however, the father continued to acquired debt through gambling so they do not want to do it again.

They are about 10 years from retirement. And have only about 80k for retirement in 401k. They live in the house with my friend. My friend has great score, makes great money, and has no debt. They would like to sell him half of the house while putting the whole loan under his name. Would this make sense? What are some scenarios you can see might benefit everyone. 

I apologize if this didn't make sense! would really love to help!

@Robin Morales The problem is if they decide that the living arrangement doesn't work anymore, neither can exit if the other can't afford or doesn't want to buy the other half of the house, which seems like will be the case for the foreseeable future.  Seems like it might be time to sell the house and downsize, if the gambling problem is recognized, you might look into who has power of attorney over what to make sure gambling doesn't put anyone out onto the street.

@Aaron K. What if they wouldn’t want to sell? Would you have my friend buy the house and charge his parents rent ? Even though they live together ?

@Robin Morales at that point the problem is that if your friend no longer wants to live with his parents he may want to evict them, which of course he wouldn't want to do, even in that scenario your friend is essentially tied to the property and his parents until they decide they want to leave.  I don't see many if any good options for staying in the house, and with a $600k house depending on where they are they could potentially buy a new house cash and be able to save for retirement hopefully.  They could also refinance the $217k and the payment would likely be less than $1000 per month if they don't pull money out.

@Aaron K. Hey Aaron, So here is what they are offering. Son Takes full loan and deed for 217k. They would like him to honor that 50% equity goes to the other brothers. Any chance it may be a good investment for HELOC and stuff?

@Robin Morales not really because he would only own 50% of the house and 100% of the loan which leaves him with $80k equity which would already be at about 74% LTV of the part he owns, it is also really unfair to your friend.

You've said brothers so I'm going to assume that means 2 others each get 25% of the house without having to take on the loan and/or live there AKA $150k equity apiece, all the while being able to pay down a mortgage on their own house while the parents are still alive/ living in the home.  

They'd get almost double the equity and have all that time to build up money elsewhere, and not have to live with their parents indefinitely with no way out unless 4 other people agree.

>Would this make sense?

I can see a whole lot of personal and financial situations that could make this turn really bad. If anything, maybe your friend could buy the place from them and rent living space to them. Even that could get ugly. Your friend does not need to be financially entangled with a compulsive gambler for any reason. 

@Pete Barrow hey Pete thanks so much for your input ! We thought of that as well. He really wants to help his parents but it seems like a ton of risk. I mentioned taking the full loan but charging them a small rent. At least !

@Aaron K. Thanks so much man ! I wish I could really help him! I noticed you’re in riverside! I’m in upland. I’m looking for a duplex or quadplex. Any cities out there you’re looking at ?

@Robin Morales we're basically neighbors, it really depends on what you are looking for in that space, it got a lot harder with statewide rent control for multifamily because a lot of units are just so far below market rent, the older cities tend to have more stock, and some of it has been pretty well preserved, Redlands/ Loma Linda, Downtown Riverside, and Corona.

I could tell you what to do but I’d advise against yoking up with such a fool that gambles his income away . The Son could setup a land trust with the dad with him being the trustee and parents and him being beneficiaries equally in such a way that each has 50% beneficial interest in the property . The trust buys out dad and takes title in the trust name .