Investing with In-laws

[Mike Walen]

My wife discussed our plan to purchase our first single family rental property with her mother. My mother-in-law liked the idea and wants to join us 50/50. She is very trustworthy and would let me handle all of the real decision making, she just wants to supplement her retirement and I suspect she wants to help us with the down payment in a dignified manner. My idea is to open a separate checking account for this project, we both put in the same amount to use for down payment and possible repairs, take out an FHA in my name (I have good credit and a much better debt to income than her) and have both names on the title. Any income would stay in the account for future repairs or further investments, but she would have access to her half if a need arises.

Are there any pitfalls that I am missing?  Any tax or liability issues that I may not have thought of?  I am also concerned with how this would work in the event of my mil's death (hopefully decades from now), as my wife is one of five children.

[Damaso Bautista]

@Mike Walen

A couple thoughts:

1. Business and Family don't mix

2. She wants to supplement her retirement.  This sounds good now but she is getting older so once this occurs you are bought and paid for and responsible for her now.

3. If she wants to help you, get a loan and pay her back, that way you are free and clear of the debt.

Good Luck!!