Buying a partial interest on an inherited house.

[Gursel Demir]

A brother and sister inherited a house and are in title as tenants in common. The brother, who lives in the house, wants to sell but the sister, who lives out of state, is refusing.

In the mean time, the back taxes are piling up and the house has become the eyesore of a decent neighborhood.

The brother has had enough and has asked me to purchase his half interest. My exit strategy would be to sue the sister for partition.

Upon purchasing the brothers interest, if I payoff the back taxes, will the sister be responsible for half of those taxes upon partition? They do not have a written agreement as to who pays the taxes, maintenance, etc.

Any other advice from those who buy partial interests?

Thanks

Gursel

[Rick H.]

Hey Gursel - I like the basic idea, even have it in my list of other strategies to employ. In addition to Gulley's, I think the basic points to remember are that:

1) Brother is receiving no benefit of ownership now

2) Sister (resident) isn't paying tax obligation which puts asset in jeopardy

3) Strategy ought to revolve around Sister buying you out for a profit

I think that the message to the Sister is that you are just an investor. Soft ball or hard ball, either are okay with you. She will no doubt initially tense up and be in fear, perhaps masked by anger. If she does not respond, provide a catalyst (attorney letter) but remember partition is expensive, lengthy and messy. Also usually ends up with auction or sale of asset. So, mitigation is the more profitable action to exhaust first.

I think best play involves typing up Brothers share and bulletproofing deal without much of any cash now. Price and terms must give you sufficient margin. Exit plan profit might be that Sister buys you out with a secured note and cash that pays Brother and leaves you a profit or positive cash flow.

Since Sister may not like that idea, she can borrow X to pay you and that's what will pay Brother from.

How you add value is that you are the intermediary between related partners who creates the catalyst for Sister to perform and provide benefits to Brother.