How To Best Leverage A High Equity House Left To 3 Siblings
My Mom just passed away and left the house to me and my 2 brothers. My Dad gets $25,000 upon My Mother's death or sale of the house. There is only about $13-$14,000 left on the mortgage (current note is at appox $860 per month and will be paid at that rate in about 2 years.) The house is worth about $500,000. The brother with the highest income and best credit currently lives in the house and would like to remain.
Any creative solutions that would
1. minimize or eliminate monthly out-of-pocket for us
2. provide a positive cash flow
3. leverage the equity while allowing us to keep the house in the family and enjoy any future appreciation
We prefer not to immediately sell the house if we can help it. Any ideas would be greatly appreciated.
Much Thanks, Dawne
Let the brother who lives in the house buy it from the estate for $500,000. The estate pays off the approximately $39,000 of outstanding obligations (Dad and mortgage) this leaves 461,000 balance. Occupant of house takes his third ($153,000) in house equity, the other siblings get $153,000 each in cash. Occupying brothers mortgage amount is $347,000 or about 70% LTV, an easy mortgage to get.
I agree with commercialking. Unless you and your other brother want to live there also, I think it's just best to go ahead and simplify everything. If you don't do it now, then at what point would you plan on taking your share of the inheritance? When your brother is ready to move out... in 20 years?
I'd get a professional appraisal done so there's no questions. I hate to say it, but siblings start to get a little greedy when dealing with inheritances. I thought it would never happen to my family... but it did.
Quote:
On 2004-12-08 00:06, stevenwe wrote:
i disagree .... i say get a home equity loan at a low rate prob less than 5% , and invest this money in secure places that truly offer higher returns than it costs to borrow....... the interest from the home equity loan will prob be tax deductible ..... and you can easily invest and make about 10% look at mortgage notes , buy a few of those in chunks of 50k ,,,,, you can even buy discounted notes ,,, for e.g. you can buy one that is 50 k and pays 9%, but someone selling that note on the market will sell it for about 46k , so you'll make osme money that way too
<font size=-1>[ Edited by stevenwe on Date 12/08/2004 ]</font>
She can cash out now and still invest that money. Are you saying the the benefit of the tax write off outweighs the cost of the interest she's paying?
I'm new, so please correct me if I'm wrong.
tom
the benefits of tax deductions are just a another positive , but its not the only reason to do this
Basically , Your able to have access to all that money , at a very low interest rate , ..... That money that you get is obviously tax free bec its a loan and not income ...... and make sure to invest that money extremely securely at a rate of anything above the rate that you get from the home equity LOAN ( a loan will have a lower fixed rate than a line of credit)
You may want to invest in mortgage notes ,
I agree with the first two respondents. Sell the property to the brother than lives in it and wants it.
Take the money and do what you want with it.
Properties that are inherited have a "step-up in basis" which means that the basis--subtracted from the sale price to determine the gain upon which income tax is to be based--is set at the market value at the time of the death of the former owner. So when a property is resold shortly thereafter, there is little or no long-term capital gains tax to pay by the heirs.
True, you will not gain from the appreciation of this particular property. But you can use your equity from the sale and buy other properties to get your CAT--Cash flow, Appreciation, and Tax benefits. Or you could invest in anything else you feel is appropriate. I do encourage investing in long-term hold rental residential real estate. You get about 15-45% a year return on your money in the early years, provided you leverage your money by getting a loan and using your cash for a down-payment.
Real estate investing is an entrepreneurial activity and is best, in my view, done individually, not with co-owners. Why risk disagreements and unhappiness? Split the money and each does what s/he wants to do with it.
In the future you might want to look more closely at the forum upon which you are posting. When you post a question that is not the forum focus, many readers will not be able to offer good advice. Find the best fit of a forum for your topic to maximize knowledgeable responses.
Good Investing*************Ron Starr************
i didnt realize u were dealing with siblings or other people , if thats the case , then the prev post is right get YOUR cash , you dont need any potential problems , especially with family
Many thanks to all who took the time to reply with options, ideas and advice. Thanks especially to RonStarr-- your post was very helpful. I did try to determine the best forum to address this issue-- but frankly none seemed a perfect match. Where would you have posted this question RStarr? I might go there for some additional feedback.
I am leaning toward recommending your solution to my sibs. I was thinking about investing my portion of the inheritance in land development (under 10 acres) and section 8 rental property. What do you think-- is section 8 still a good investment in Georgia?
Thanks again-- Dawne