All Forum Posts by: Aaron S.

 Can we sell both MTR and condo and roll both of those gains into a 121 purchase on a new house?

 We love this comment! But...seriously? No glaring issues from a financial advisor?

What would you do?

35m/28f couple. Household income $275k/yr

-TSP #1: $205,000.   

-TSP #2: $76,000

-Brokerage and Savings: $40,000

-long-term rental property, VA loan, cash flows $200/mo. est. $100k in equity. Built in 1997, generally low-maintenance.

-mid-term rental property (rented room by room via furnished finder), VA loan, cash flows $500/mo. Unknown amount of equity due to unknown house value.* Newly built in 2022. An absolute headache to deal with due to corners cut by the builder (we are outside of the build warranty). Every few days there are new issues and we are constantly having contractors and technicians at the house dealing with one problem or another, while coordinating with our tenants who are on a range of work/sleep schedules.

-condo that we live in as primary residence, VA loan, est. $40k in equity. Built in 1985, generally low-maintenance.

*a near identical house (same blueprint) was built next door and has not sold for 8 months. The price seemed reasonable but apparently it is too high. This makes us uncertain as to our own realistic house value.

Situation:

We are interested in purchasing a new house for us to live in, and rent out our condo as a long-term rental.

The house we are interested in is a Meritage new construction. $515,000. It has a very nice bath tub that is of high importance to us personally. We heard offhand that only 20% of homes in our market have bath tubs. The area is also good, safe, and with nice mountain views. 

We have 3 active VA loans. To use our remaining VA entitlement and put down as little as possible (without paying PMI), and quoted 5.375% interest by Meritage's preferred lender, our estimated cash to close is $72,000. 

We are considering taking out the required cash to make up that total from our savings, brokerage, and 2x TSP loans from our individual accounts. These loans would be repaid back to our TSP accounts at 4.475% interest.

Complications:

-The condo would not cash flow if rented out. A property manager analyzed comps and it appears that the condo would lose ~$150/mo, before repairs. 

-We are dealing with a mysterious leak at the midterm rental that is tying up a lot of our time, energy, and money. We are using up all of the $500 deductible from home insurance to cover water damage restoration. We are still trying to identify the actual leak source, and figure out how much it will cost to repair it. And also what to do with our tenants that will not have a shower for who knows how long during repairs (any recommendations for how to manage this?)

-The midterm rental also has a new, main line leak that we are getting looked at tomorrow with leak detection. We do not know if this is related to the other leak, or some other issue.

-The TSP loans give us pause due to conventional wisdom saying, "you should not take money out of your TSP." I have done this once before to purchase our condo with no issues and we both make more than enough money to pay both the new mortgage and pay ourselves back (85K + 3600 after tax monthly retirement for my partner, and 140K for me).

-With all of the above stuff going on, maybe taking out TSP loans, spending almost all of our liquid cash and moving into a new house is not a great idea to do right now.

FAQs:

Q: Why not get a property manager for the midterm, if running it is such a headache? 

A: Because it is rented by the room, we cannot find a property manager who will run it for us. Especially not with 4 separate leases. Even a 10% PM fee would bring the cash flow down to zero.

Q: Why not rent the midterm as a traditional rental, with a property manager?

A: There is a lot of furniture in that house that we would have to figure out what to do with, if it were rented as a SFH with no furniture. Do-able for sure, but a lot of work. With a 10% PM fee, there is a possibility of some small cash flow, or maybe break-even.

Q: Why do you need to do anything? Why not just stay where you are?

A: While our condo is fine, we would prefer more space and a nice bath tub. It sounds silly but in our market this is difficult to find. 

So...

What would you do?

She was added via quitclaim deed.

 Thanks for your reply. She agrees that we are not in this 50/50 with my added financial risk. I offered something like a 60/40 split on the rental income but she did not like that. What would be something fair and equitable so we can have 2 happy partners instead of one? Any ideas would be helpful.

In 2022 I bought a single family home with a VA loan. I house hacked with my partner paying half of the monthly expenses. We also had 2 roommates and we split the rental income from them every month.

After a couple of months, my partner and I decided to make her a co-owner of the house. She paid me 50% of the costs up to then for buying and maintaining the house, although she did not get added to the mortgage. The mortgage remained in my name. We moved out of the house after a few more months and rented out the remaining rooms and have been splitting the monthly rental income, cash flowing about $1,000 per month total. We continue to split all costs and efforts 50/50.

For 2022 taxes, we have a disagreement. I said that I should be entitled to claiming the mortgage interest because I am the only one responsible for the debt. I reasoned that she was in the advantageous position of owning half of the home, equity and rental income without acquiring any debt to her name, and thus I was entitled to claiming the mortgage interest because if she decided to stop paying me, I would still be responsible for the entire mortgage amount. Defaulting on the mortgage would also only negatively affect me, not her.

Her point of view is that she will have a disproportionate tax bill compared to me every year because she cannot claim mortgage interest or depreciation (let us know if we're wrong on that one). She has proposed that because she is paying (Venmo) for half of the operating expenses to include the mortgage, that for taxes I should claim all of the expenses and all of the rental income due to the complications of only me owning the mortgage. 

So, what is the fair or correct thing to do?

Thanks for the replies folks. I wanted to post here in case I was missing something but it sounds like we have our bases covered.

She would likely be happy with me paying a fair market value for her used bedroom furniture so the tenants won't be disturbed and then she can go buy new furniture at her new duty station. 

Thanks again for the feedback.

Background: In March I bought my first house hack as a single, unmarried man with a VA loan. While I paid all closing costs and a 15% down payment*, my girlfriend paid $5,000 of the down payment in exchange for equity in the house. She mostly did this as a favor to me because I was not expecting the VA appraisal to come up short and I struggled to take out down payment funds. Ok, so far so good.

We moved in together to the new house and split the PITI and utilities 50/50. We also have two tenants who live on the property and we split the rental income 50/50 as well. My girlfriend also owns another rental property that is 100% just hers. I moved in with her there in December 2020 and she was house hacking with a roommate and then Airbnb. She shared the rental income with me 55/45.** We also had a rental agreement for me living in her house and currently have a rental agreement for her living in my house.

90% of the furniture in the house belonged to my girlfriend before we moved in together. The 2 rooms we rent are fully furnished with her bedroom furniture. The only furniture in the house that was mine before we got together is our master bedroom furniture. When I bought the house that we currently live in, my girlfriend moved all of her furniture into it and rented out her house unfurnished. It cash flows a nice $500/mo, 100% to her of course.

The issue: My girlfriend wants to buy into 50% of my house and get her name put onto the title. I am comfortable with that and agreed, however there is an issue with her career. She has a medical problem and is an active duty military officer. She will have a medical review board to decide if A) She will stay in the military and be retrained into another career field, which would almost certainly force her to relocate somewhere else in the world, or B) she will be allowed to separate with disability pay/medical retirement. She has a great degree from a very prestigious university and will likely be able to find civilian work (remotely) without much problem.

The issue is that because we do not know what will happen to her, and we are both very against trying to maintain a long-distance relationship with possibly no end in sight (ie, the military can move her anywhere and is not obligated to ever return her to her current, local base of assignment), we are hesitant to continue with her buying into my house. If she is forced to relocate, as of now our plan is to end our romantic relationship due to the logistical challenges it would present. Supplemental information is that I have a child from a prior marriage that lives here in town with their mother and I do not want to relocate away from them for at least a few years as they grow up. 

Because my girlfriend is, at this time, only owning a $5,000 share in the house, I as the homeowner have been solo paying for most of the many house-related things that a landlord/homeowner should: buying a refrigerator, window treatments, furnishings like rugs and carpets, shelves being installed, repairs etc. Our thinking currently is that if she is able to exit the military and remain in our relationship, that she would retro-pay 50% of those costs (including closing costs) to me as a 50/50 co-owner and be put on the title, along with a legal agreement giving her 50% equity in the house. As if she went in 50/50 on the deal with me from the very beginning.

If she is forced to move with the military and we end our romantic relationship, then she could either keep her $5,000 stake in the house or I could pay her that money back. I am not sure what we would do with all of the furniture because again, she owned pretty much everything except the master bedroom furniture prior to us getting together. If we broke up and she (rightfully) took her furniture with her as she moved out, that would obviously disrupt our tenants because they are renting fully furnished rooms (with her furniture). Conservative estimates for me is that breaking up and her leaving with all of her furniture would cost me $10,000 to replace the goods and $5,000 to pay her back for her part of the down payment.

My question is, what would be the most fair way to do either option A or B, depending on what happens with her career/our relationship? What am I missing here?

Thank you!

I'd like to get out ahead of some predicted statements that I am not looking to argue or debate:

"You should never buy a house with someone you are not married to." 

"If she did not know what her situation would be then you should not have moved in together/combined living situation"

"This is a bad idea."

*This was to make up the difference between the VA appraisal and the sale price.

** This was because all of the furniture and the property belong to her alone, but I did all of the turning over service/cleaning/preparation for ABNB guests. She was generous enough to profit-share with me at all, so now I do the same with her in my house with my tenants. Except it's 50/50 because she still owns the furniture that the tenants use.

 That's fine. Some good, practicable advice was shared in this thread so I certainly appreciate you and everyone else's time.

 There is actually some good data/studies on exactly that. The leveraged ETF TQQQ did not exist back when the tech bubble burst, but it would have lost 99% of it's value if it did exist at that time. However, I did not start a thread here to argue the merits, pros vs cons of leveraged ETFs. I'm sure we could really get into it but I'd prefer to focus on what my next moves should be at this stage in my life.