How To 'Acquire' Property From Aging Family Member

Question

I could use community input on how to handle sticky family situation.

I have a family member with two 8-unit properties in central Philadelphia. Each property is worth about $2m today and mostly occupied. The family member has held the buildings for decades and managed on his own, but he is 80 years old with health declining and cannot properly manage them anymore. Each property probably needs $200k-400k worth of work for deferred maintenance, repairs, and moderate upgrades.

He would like me to take them over for him. He is willing to sell at a discount (with or without a seller note) or to put them into a trust with me as beneficiary as long as I agree to take over all management responsibilities (directly or indirectly). He wants some cash either in lump sum or annuity in the form of interest and principal payments or continuing to receive majority of income.

I live in Wash DC and have a busy career so I assume I'll need to have a local manager. I am a novice with no RE investments. If I do not take on the properties, he will sell within the next 12 months to an unrelated party and I will never receive any portion of the proceeds. I don't mind putting in some time and effort, but want to make the best decision for all involved.

I have about $250k cash and $1.4m equity line of credit at 6.5% interest.

What should I do??

Jules Aton · Answer

Do you want to invest in RE? That is biting off a big chunk right out of the gate especially with known property deficiencies. I also suspect your family might have something to say if you essentially inherit the farm. This could be the opportunity of a lifetime but be aware it will take longer,  be more challenging and cost far more than you can imagine.

Cameron Johnson · Answer

Hey there! I'm a local property manager here in the Philly area and wanted to jump in here.

Look, this sounds like a classic opportunity, but you're right, managing from DC is tough, especially with deferred maintenance. Since you're new to this, my advice is super simple:

• Get a Local Manager ASAP. This immediately solves the health concern for your relative and protects the $4 million in assets. A good manager handles everything—from the deferred repairs to tenant calls—so you can just manage the manager from DC.
• Figure Out the Money After Management is Stable. Whether you buy it at a discount, use a seller note, or put it in a trust, having a professional team in place gives you the breathing room to structure the deal right.
• The Fix-Up is Key. Don't commit until you know the real cost of that $200k–$400k in work. You need a Property Condition Assessment (PCA) before you sign anything.

Hope this helps!

G. Brian Davis · Answer

This is a delicate situation, both financially and emotionally. These properties have deferred maintenance of $200k–$400k each, and you have no prior experience managing real estate. Even with a strong property manager, overseeing two 8-unit buildings remotely can be a major responsibility, especially if unexpected repairs arise. Factor in vacancy risk, and ongoing management oversight.

Becoming the beneficiary of an irrevocable trust could give you long-term control while honoring your relative’s wishes and minimizing upfront cash outlay. If he wants some income or skin in the game, seller note or small annuity could satisfy him without over-leveraging you. Modeling out cash flow, reserves, and realistic return scenarios is critical before agreeing.Also I suggest you bring in a CPA, real estate attorney, and property manager early to help structure the deal to protect both you and your relative.

Also consider your own capacity and goals. If this will stretch you too thin or impact your career, it may be better to negotiate a smaller stake or phased involvement.

Sheryl Sitman · Answer

That’s a complex situation with a lot of moving parts (ownership structure, tax implications, capital needs, rehab budgets, local management, etc). Before making a commitment — the absolute best step for you is to understand the actual numbers and the real range of scenarios.

You need to:

• look at current NOI
• model pro-forma NOI after deferred maintenance is handled
• compare a seller-note vs direct buy vs trust transfer
• realistically estimate capital improvements realistically for 8-units in Philly 
• assess the operational plan (self manage vs PM)
• and lay out the possible outcomes for you specifically (tax exposure + risk + time cost)

do this BEFORE saying yes or no — otherwise you might commit to something that becomes a burden or lose out on a great opportunity

I know people capable of this type of scenario modeling in Philly if you want some connections. Just be sure to make a decision based on data and professional advice.

Ashish Acharya · Answer

Hey @Matt Friedman! There's been some good advice and replies above. I like what Jules said about deciding if you really want to invest in real estate. It is a lot of work (more than people like to admit), but it can be worth it, and this sounds like a good opportunity. Like others said, you'll want to check financials and do a full inspection. Check all the boxes before you jump in blindly.

From a tax perspective, this could go a few ways.

If he sells to you at a discount, the IRS may treat part of that discount as a gift, which could trigger gift tax filing on his side. Buying with a seller-financed note spreads his capital gains over time, which can ease his tax hit and cash flow.

If he puts the properties in a trust with you as beneficiary, the step-up in basis rules matter, if he passes them down after death, you’d get a full step-up and could sell later with minimal capital gains tax.

You’ll also want to think about depreciation recapture, future rental income taxation, and possibly creating an LLC for liability and expense deductions. Suppose you do move forward and own the properties. In that case, you’ll have the opportunity to strategize and deduct expenses like mortgage interest, property taxes, repairs, management fees, and depreciation, often reducing your taxable income significantly. When you sell, you’ll owe capital gains tax, but you can defer it with a 1031 exchange.

Before moving forward, run both scenarios (purchase vs. inheritance) with a CPA to compare after-tax outcomes, the difference could be hundreds of thousands. You'll also want to get in contact with a Philly-based real estate attorney (trust / seller note).

Matt Friedman · Answer

I appreciate the comments. Not really hiding any facts. Suffice to say my relative is not guy and he's basically going to donate all of is a state but for sentimental reasons he'd be happy for me to take over his properties as long as he feels like he's getting a little something out of it. Why he wants me to have some skin in the game when he's otherwise just going to give everything away I couldn't tell you. Based on the modeling I've done one of the lowest risk options and best IRR is probably for me to assist with the management today with little or no compensation and then take the property as the beneficiary of an irrevocable trust.

John Clark · Answer

No jails of any kind, Ken, and which state are you referring to?

Ken M. · Answer

@John Clark: you say you are an attorney, but Martindale-Hubbell says there is one attorney named John Clark and he is a divorce attorney. Taking real estate advice form a divorce attorney is like taking medical advice from a horse doctor.Does the Bar know you are giving real estate advice on a forum? Hmmmm?

By the way, weren't you in Bigger Pockets jail for the last week?

How To 'Acquire' Property From Aging Family Member

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