House hacking with family

House Hacking
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House hacking with family

David N.
Member since 2021 · 59 posts · 16 votes

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!

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  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    2y

    @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. 

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  • David N.
    OP
    Member since 2021 · 59 posts · 16 votes
    2y


    @Andrew Postell thanks so much for the detailed reply. 

    I see your point. She is nervous about getting into a montage right now because of the high interest rates. That's why she would need me. She wants some sense that there is a safety net if it turns out she can't afford it or needs the down payment back. I'm less concerned about this because I see the long term potential. At the same time, I'd like to help her build wealth. Assuming she doesn't decide to back out of the deal in less than 7 years, assuming we sold the property, we could still split the equity returns at some predetermined ration.  However, it sounds like if we were to buy it as a primary residence for her that a partnership won't work though which makes things challenging. 

    I will take your advice and do some research into leveraging retirement dollars.

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  • David N.
    OP
    Member since 2021 · 59 posts · 16 votes
    2y

    And just had another thought based on the advice about leveraging the retirement income for a loan. Assuming I could find a property where I could post enough cash to cover the down payment, I'd love someone's thoughts on this idea....I do the deal myself, but then have my niece move in to one of at least two units in a proposed property. Her rent goes towards a lease to own arrangement. She retains a right to be offered the opportunity to purchase before I sell to anyone else for up to five years. At that point, we could renew the arrangement or not. If she buys, her rent payments are credited towards the purchase like a traditional lease to own. Also, while she is living on the property she helps to manage the other tenants. This way, her rent is not being wasted, but she is assuming little risk. Since what I'm interested in is the long term equity, I'll be happy as long as the mortgage payment is covered.

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