House hacking with family

[David N.]

I have a niece who has been thinking about buying a place but is reluctant to pull the trigger. Meanwhile, I'm interested in getting into real estate investing and am low debt, high income, but cash light outside of emergency savings and my retirement portfolio. I'm trying to imagine how I could partner with my niece to reduce her perceived risk and I'm trying to be creative. I'm thinking about a couple options - 1) Lending her the money for the DP on a multi-family unit and then starting a business where have a joint partnership that owns the house. She would live in one unit and rent out the other; 2) having her provide the down payment, and I would co-sign the loan. We could create a partnership and my niece would live on one side while we rent out the other. We would be co-owners, but I could offer a commitment to buy her out at some point certain if she decides she wants her DP back and to walk away. I'd love thoughts on these ideas or any other ideas especially if anyone has done something like this before. Thanks!

[Andrew Postell]

@David N. some pointers here:

1. With most primary home loans you are not allowed to lend money to someone for the downpayment.  You can "gift" the funds to them...and you will sign a letter stating that they don't have to pay it back...but lending isn't allowed.

2. We usually don't buy primary homes in a partnership.  Usually, you are required to be a named person (no companies) on the title.  If your niece has her downpayment, why would she even need you at all?  If she walks away from a property just getting her downpayment back...that's not very much benefit to her.  The whole point of real estate is that we build wealth.  With what you are suggesting she would essentially be putting her money into a conceptually "no growth asset" if she just walked away.  That's not good for anyone.

If  you do have money in a retirement account the do some research on how you can use that to invest in real estate.  Lots of people go that route.  You might be surprised at what you can accomplish.