Advice Needed House hack in my parents muliti family home?

Question

Here’s a situation that one of my relatives is in.

If anyone has advice or experience I’d appreciate it.

I have a family member that is in a bad spot. They have personal loans, heloc, and mortgage they cannot pay based on a newly reduced household income.

Their parents want to help but also have shakey finances.

However his parents have a 2 family investment home, that is free and clear of debt (in addition to the parents primary) but the parents need income from that home for their retirement (now) and also both the parents primary and the investment property need rehab soon.

I’m trying to think of a way where maybe my family member can sell their own primary, use the equity to pay off some of the highest interest of debts, then pay their parents some equity that allows the parents to renovate their own primary, then my family member move into the multi family as a tenant, but also pays a bit more than normal rent, so the parents get the cash flow they need, and maybe the “rent” is at least a portion of it rent to own, (in a way that limits taxes for the parents?) maybe via an LLC the house is put into where my family member gains shares of ownership annually over time?

Am I dreaming that there is a playbook for this?

Jake Andronico · Answer

@Kerry Baird

Sounds harsh, but completely agree with you.

Kerry Baird · Answer

This seems like a Dave Ramsey episode.  Parents, don't bail out your adult children.

Adult child, solve your finance problem; get a first and a second job, sell something, get a roommate.  Adult child, don't take away from parents' retirement holdings...holdings that they earned and took risks to earn.

Jaron Walling · Answer

@Louis Zameryka Hmmm yes you're dreaming. In a perfect world something you described could be pulled off but in reality it's not going to happen. The parents control all the cards. They have all the equity and PAID FOR properties. For them to sell and "gift" this equity is a big ask. From what you described they're already in or close to retirement. Older people don't like risk. Selling an asset that's paid for or has a low fixed rate (can't get those right now) is crazy.

Nobody likes talking about the hard work in the background; just the success stories. The family member needs a plan. They need a job and stable income. What are they giving up to get out of debt?? What sacrifices can they make to implement the plan you laid out. It's not impossible but the parents need some security along the way.

Dan Guenther · Answer

@Louis Zameryka - this sounds like it could be a good opportunity for a seller finance deal. Depending on how you worked it out, the sellers could get a downpayment from the buyer's end and then essentially collect rent checks for whatever terms each party decides on. This would spread payments (to the seller) out over time and allow the sellers to get more for the property than they would if just selling it the traditional route. Are you familiar with creative finance options?

Jaron Walling · Answer

This exactly! In a lot of situations it's stupid and unfair to help adult children solve problems. There's a fine line between helping and enabling. It's just tossing money back and forth and there's always expenses in between that someone has to pay. If the kids find a full-time employment and/or get some rehab experience that changes the dynamics. Some sacrifices need to be shown. Some skin in the game.

Louis Zameryka · Answer

Hi Jaron, thanks for replying. Maybe I was not clear enough in my post. The parents want to help. So they are open to finding a workable solution that achieves the following.

Kid pays off some of their debt via selling home.

Kid pays them some $ so they (parents) can rehab their own primary

Current investment property still cash flows for them but new main tenant is their kid, and that payment from their kid is basically like the kid buying equity into the multifamily home (which likely was eventually going to be partially an inherence for the kid). The kid also has to rehab the multi family on their own dime (at least their unit).

I agree completely about hard work, and tough decisions. Which is why I am trying to help them figure out their own solution, rather than just giving them both the $ they need.

Does this help inform any new points of view in your reply?

Advice Needed House hack in my parents muliti family home?

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