splitting rental property profits with family: any experience?

Question

hi everyone. i've been thinking about using my mom and dad's house as a rental property and would like some input. i'll try to provide a lot of information while keeping my post short.

regarding my family dynamic: my dad passed away and my mom is living by herself in the house. they want to leave the house to my siblings and i. there are 4 of us (2 sisters, 1 brother, me). my 2 sisters live out of state each in a different state and don't plan on moving back here. my brother and i live in state but we both have our own things going on and don't plan on moving back into the house. ive only spoken to one of my sisters about this.

regarding the house: IIRC my mom did a refinance, i THINK because her name wasn't on the loan. for some reason only my dad's name was on the original loan. i'm not sure what the terms are of the loan but i think monthly payments are in the mid-$1000 per month. it's a 3 bedroom 2 1/2 bathroom house. comparable rents in the same city are (according to zillow) listed at over $3000 per month currently. i haven't looked in to property management costs yet.

can anyone who's ever split a rental property one or multiple ways with family think of anything that all of us have to consider? how this works for me and my brother versus my two sisters? what we should do? thanks in advance.

Anthony Nunez · Answer

In addition to the strategy mentioned about 25% after hiring a property manager, you can also get the house appraised or get a CMA from a trusted realtor and see if any of the siblings would like to be bought out of their position. Some may need the money now and not want to deal with the rental hurdles and opportunities. This move could open you up to having 2 owners and one passive where a 70/30 split for example could be worked out where the difference is the compensation for the active sibling overseeing/managing the property. Or, you can simply sell it while the sole owner is alive which makes the transition smoother. Hope this sparks some more ideas, best of luck

Scott M. · Answer

Important for all of you to go into this with your eyes open. If you own this as a rental for years someone is likely to disagree and feel hurt and left out or taken advantage of. May happen on day one, may not happen for years and of course it may never happen.

But the odds are someone will get hurt. In addition to finding ways to split money you need a way to deal with the feelings that will arise out of this. Spend time upfront agreeing on how those feelings need to be heard and dealt with. You have 5 people if you are including your mom and the odds are 5 or even 4 people are going to agree on everything, or that you will all need the money at the same level at the same time is low. Some will want to sell, some will want to rent, some will want to do cap ex, some won't.

Just as important to the financial/legal structure is the emotional structure you put in place and few think of this part upfront. Do yourself and your family a favor and think of this part upfront.

Matthew Irish-Jones · Answer

@Calvin Matthews it’s pretty simple. You can hire a property manager he ca. set you up in his system as 25% owners and you all get a draw equal to your portion of the net proceeds.

splitting rental property profits with family: any experience?

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