In Laws Transfer, North Lake Tahoe, Ca. “Deal or No Deal”

[Nate Morris]

My in-laws are offering to deed transfer their North Lake Tahoe vacation rental house to us with some good terms attached. They are tired of managing the rental, have plenty for retirement, and ready to move on. They will 1) leave 50% cash in allowing us to pay them back over time, 2) let us assume their low interest loan for 30% and 3)pay them a cash down of 20%. Likely we would then refinance to pay ourselves the 20% back is in their equity to meet min requirements for loan. The rent income estimate covers 80% of the loan payment + operating expenses. Note my wife would manage the daily inquires, contracts, etc. That market is not appreciating very well. There is over supply and the rents are also not increasing. Likely we will need to invest $10,000 into the house (furniture, Flooring, features) to make it more attractive for renters. Self managing a rental comes with tax advantages, primarily taking losses against our other work income. The exact deductions are fuzzy, as the depreciation of structure is estimated, and interest on loans (via parents) is fuzzy. At the end of the day, I believe this we will pay out $500 per month to have this place, plus the work of managing it. My wife says she is up for it, thought I am not so sure. Note also, there is also realtor fees to consider once/if we sell down the road. The house has not appreciated much since her parents took ownership so there’s not much in the way of transferred tax burden. Your thoughts are appreciated. We do enjoy visiting that area. My wife would likely manage the The rental. By my calculation pulling all the cash out leaving only equity necessary to secure loan, and the house will be -$750 per month income. The house would have tax deductions for self managing vacation rental. We could transfer at a lower tax base possibly. Not much in appreciation since they bought it so little risk in transferred tax burden. Realtor fees would be a concern if we sold, though likely this is a buy and hold. Any thoughts? Deal or no deal?

[Luke Carl]

I manage 5 vacation rentals that bring big returns and I still have to roll my eyes on an hourly basis at the messages that pop up on my phone. 

You couldn't pay me to take a loss while self managing. (get it? lol)

This will feel like you're paying your boss to go to work. Doesn't sound fun to me!