Helping my son on his way to house hacking vs. renting to him.

[Jeremy Gray]

My son graduated from college last June and has been working part time and living in our house, but is planning on going to law school in the Fall of 2020. He and his buddies have been trying to find a house to rent, but haven't found anything yet. They are all in their early twenties with new jobs and little to no job and rental history. The area he is looking at is a decent established area and the rents would support the mortgage, taxes, and insurance but with just enough for repairs and maintenance and little to no return. He has inherited a little money from my parents that would cover a 10% down payment plus he has saved enough for another 5%. I was considering helping him out by cosigning a mortgage and helping with the closing costs, so he could house hack instead of renting.  I was thinking I could have a separate contract with him that would obligate him to make the payments in a timely manner and maintain the home in exchange for my cosigning the note. If he failed to maintain the home or make the mortgage payments on time, I would have a quit claim (signed by him when I cosign the note for him) that I would only file if things started to go sideways at some point. He is a smart young man, doesn't do drugs, but he can be a little lazy and is a bit of a slob. His friends are all good guys, but none of them are knocking it out of the park getting started with their lives.

As an alternative to him buying it, I could just buy it myself and rent it to him and his buddies, but then we would miss out on the lower down payment and lower interest rate of a first time home buyer. If I bought it, he would be have a decent cushion to pay for part of his law school tuition.

I am looking for thoughts and opinions.

[Nancy P.]

If he's interested,  I'd help him buy a condo.  Far less maintenance issues.  But he has to deal with roommates.  Friends can be great or awful as roommates.  The side deal makes me nervous, though.  Who decides what is "proper" care of the place?  If you took over you might destroy the relationship.  My MIL gave us the down payment on our first house,  but we were closer to 30 as we have advanced degrees.  Just now our kids live in our U.S. home rent free as we are on 3-year Germany job assignment.  It works for us because we didn't want to store things or bring them here,  they care for the ancient dog, we have a home base when we visit the U.S., etc.  When we return we expect to give them each a  25% down payment on a condo,  whoever buys the cheaper condo will get cash to equalize the gifts.  Both work but neither are hugely ambitious,  that seems to be the way of people in their 20's more than before.  With a modest purchase both can get by with their unambitious earnings,  or bring in roommates and really boost the bottom line.  It will be up to them.  We will have done some reducing of our estate and know they have a roof over their head so no excuse to come asking to live at home again. :)