Home investment split

[Nazia Feroz]

Hi. I bought a home with my sister and my dad. We each put down equally for down payment and equally shared the mortgage payments until I moved to another country. I stopped making the monthly payments when I moved. My dad and sister continued with 50% each. We want to sell the house now and need to know how to divide the capital gains. After selling the property we are looking at $300k in gains. Or if my dad and sister want to buy me out, how much should I get?

[Jeff Chen]

Hi Nazia,

Check to find out how you hold title,  most likely if you have 3 people on title, you most likely are holding title as Tenants in Common with 33% interest in the property. If they are not too keen on selling (i.e. tax consequences as well as purchasing another home with higher taxes), I would recommend getting a 3rd party appraisal for the property. Let's say the appraisal does show that the property is now worth $300k above what you paid for, then you can work with a title company for a quit claim deed transfer and "sell" your portion to your sister and father for the 33% interest (if the home was paid off). For example if the home was purchased for $500k and is appraised at $800k, you could come to terms to pay you $264k to buy you out (but this can be tricky if they don't have the cash, then you would need to sell).  You will want to talk to a tax attorney on the capital gains, since you had just made $100k on an $166k investment (if you paid $500k) and is not your primary residence. Since you sister and dad are living on the property it can be considered their primary residence. 

One other thing to think about is the loan payment, if the home is not fully paid for, you cannot do a quit claim deed and sell your portion to your sister and dad, you would need to talk to your bank about being removed from the title, relinquishing title and selling your portion to your sister and dad. I would say it would be difficult for your sister and your dad to come up with 33% of the current value of the home if they aren't keen on selling.

I was in a similar situation with my brother, we bought an investment property together, but he didn't want to be a landlord and asked that I take over it and he would sell me his share back to me. We ended up selling the property instead, and figured out a number that we both agreed on. Since you did leave and your sister made up for the mortgage payments (and receiving the benefit) you may want to figure out how much equity they continued to contribute when you left the country and what that amounts to. Hope this helps, if it did, please help me to upvote these comments. Greatly appreciated.