House hacking

[Steve Kehoe]

I have two daughters in their 20s who have just graduated from college.  I offered to put up a down payment on a house hack.  They have to landlord, pay maintenance, and we split profit when they sell.  I want this to be a business transaction - not a gift.  How is this usually structured.  I want a hard nosed business deal.  They don't know they will have a big inheritance and I want them to learn from this.

[Dave Foster]

@Steve Kehoe, Much as you love them, the key is for you to retain control of the situation while they learn so you don't get hurt and their mistakes don't hurt as much. Create a holding LLC with you and them as members. You have majority interest and nominate yourself as managing member. Operating docs spell out their duties in exchange for their membership interests. If at any time they fail to perform then the managing member can terminate their involvment and you can always make a unilateral decision to sell the property if you choose. Or you can transfer interest periodically working with your accountant to slowly move the property totally into their control.