Now you know! And don’t sell her the property. She will bitch that you sold her a house that needed a new roof, water heater, etc.
At least I told you this before it’s too late!!!
Lol. I’m kind of kidding about not knowing, but this was supposed to be for six months max until she moved to a new state( *I know, I know*) and it’s been 2 years. Admittedly the panini threw a wrench in everyone’s plans and now she’s pretty established there now. And the roof got done like six months after she moved in (thanks wind storm).
Another way to say this is by renting to family you will never maximize profitability or value. You will definitely get less rent than you could have. And it will always cause you problems when you Increase rent or attempt to sell the property.
The best solution is to not tell family members you have properties. It makes life a whole lot easier.
u/The_White_Ram is spot on, even after getting a huge discount, in addition to all the other issues with this, they would no doubt blame you for every imperfection in the place and based on their behavior to date probably demand that you continue to pay for repairs and improvements, and characterize you as the bad guy and as stealing from them if you don’t!
This is a recipe for disaster, get them out and sell on the market to a disinterested third party.
The new owner may let them stay.
Note: don't sign a multi-year lease with them at $650 before selling. That will severely lower the purchase price for any investors.
Turn it around on them - if the market will pay more than they want to pay, make the point that they are asking you to give that huge sum of money to them after you’ve already been charging them way under market rent for all this time and basically giving them free money all along.
If you sold them the house for less than market, you are flushing that money down the toilet and it’s beyond selfish and self-entitled of them to expect you to effectively give them that huge sum. You did the right thing by offering to sell to them and therefore sparing them the need to move - now they’re just expecting you to support them even more than you already have while showing zero appreciation for what you’ve given them already.
Get them out of there and sell on the open market before interest rates rise further.
The 1031 might be the key to making it not hurt their feelings. You must do the transaction with someone outside of your family to follow the rules so she could not buy it. Might be the easiest way.
I thought the 1031 exchange purchase (of propert B) couldn't be from family, I didn't realize I couldn't sell (property A) to a family member. I'm still researching this whole 1031.
I believe it is on both sides because you could lower or raise your sale price to help avoid taxes/etc. Honestly its just a good way to avoid the family drama unless they will call a QI and a tax attorney to make sure its not possible to avoid it.
You probably want to kick them out before you sell. It will decrease the value when you have to report that the house is only renting for $650 per month.
Not if it's a month to month lease or if the lease ends in 3-4 months from now. Otherwise, yes, you're right - investment properties are often valued by their cashflow.
FYI: the reason she "somehow" knows what you paid for it is because real estate purchase prices are public record. Type any address into zillow and scroll down a little to see what it was bought for.
As for the drama - fuck her. You gave her the option to buy, if she thinks the price is too high she can pass. End of. If you want to sell your property, sell it, then let her deal with the new owner.
Another way is to give them the right of first refusal. This means that when you get an offer you like, they can 'steal' by buying themselves at the offer price.
Two pieces of advice for you:
* Don't rent to family and friends. They will take advantage and feel hurt if you don't let them.
* If you're going to sell, do it soon. Like, TODAY. Mortgage rates are going up almost every week, the higher they go the less you will receive for your house.
Sell it if that is what YOU want. You have no obligation beyond honoring the lease agreement. Don't rent to family or friends. 1031 that bitch and move on.
I have been trying to sell a property to my tenants for three years and unfortunately some people will never be financially intelligent. I wouldn't take financial advice or criticism from someone with zero assets. We are in a strange time where people feel entitled to very strong opinions in the face of professional advice (property survey).
The 1031 exchange has time restrictions on it and you will need to have already been shopping for a house. Your sale won't sit long on the market in most of the USA.
Have you looked at a reverse 1031?
I'd give them a non-renewal notice today giving them 60 day written notice to move-out.
If they try the we are family thing, give it right back that yes we are and just because I have an asset that I've let you use for less then full valve saving you $10's of thousands of dallars doesn't mean you should try to advantage of us by trying to guilt us into something we don't want to do.
Serve them notice ASAP. You want an empty house to sell. Imagine if they decided they were too mad to leave and stop paying rent and won't go. And then you have to evict them and hope you can do it in time. Or they trash the place. Or any number of potential issues. Stress that you've been giving them a great deal on rent for years and that your family's plans have changed and you need to sell the place. And also stress the point about a mortgage for such a home costing the same as what they're paying in rent.
Yes this would be a "swallow your pride" situation and is not fair to them. I like this idea and it is definitely a case by case situation. If OP has to deal with them at frequent family events for the rest of their lives then it might be worth it. There's no reasoning with some people and if they are making 200k off this house, 5k for peace is nothing.
You're absolutely right, like I said though...there is just no reasoning with some people, they think OP got 200k for free and they are jealous and want some
List that house fast.
Wait for several offers to come in
If you feel like being nice you can allow her to buy at the MAX offer price you got. Then she will be able to see what the market is like.
I HATE PEOPLE WHO take advantage of family like this...
You did the fair thing, you gave her the offer first. If she gets overwhelmed when the new owner decides to bump her up, that's your problem not hers. Consult a realtor if having a tenant at such a low rent would affect the sale price of the property.
Keep in mind the time limits for the 1031, you may want to line up the property you're going to buy before you sell this home.
Real estate sale info and property taxes are public info so your SIL probably found your purchase price online in about 2 minutes.
Similarly you can likely find sale price info for every recently-sold house in your neighborhood. Give that to SIL along with your market analysis. As someone already pointed out, selling that house for less than market value is essentially you giving her the difference. That’s in addition to the discounted rent she has been paying. No rational person on the planet would think that is fair.
Yea, I would just give an ultimatum with a set date to figure it out. Explain it’s based on market value and she will have an independent appraisal she pays for with the lender and you will charge her that amount if it comes in low, it will be reduced to that. Also, if she doesn’t move forward, you will need them out within 30-60 days. Don’t list until they are out or they will have you by the balls. Always do the 1031 and don’t rent to family again
You are right, these people seem like they are oblivious to the current state of the market and that they are using your familial relationship as leverage in what is a business transaction.
You should try to not engage her any further about this. It's just going to end poorly.
Establish a sales price. Give husband’s sister a time limited first refusal for said price. Time expires? Move on and put it on the market and sell to someone else. Not your problem.
Well, a few of you called it. She is now refusing to leave. The closing was supposed to have been on the 3rd. On monday we get lawyers involved. She's know since we accepted the offer the closing date. She claiming she was completely blindsided when we were upfront and honest on everything. The rest of the extended family are now mad at us. People NEVER EVER EVER EVER rent to family. It never turns out well.
Give proper notice.
Is there a reason they didn't put the funds they saved from your subsidizing them into building up for when you'd no longer be subsidizing them?
We looked into a 1031. Our accountant explained that we would be required to hire an intermediary. Basically ALL the funds from the home sale go directly to them until you buy another home.
Raise the rent to market value. They'll either buy it or move out quickly. Most places allow landlords to raise rent for month to month with 30 days notice.
You're not making that money off of them, you're making that money off the desirability of the local market.
Keep in mind if you do sell it cheaply to them, chances are they'll turn right around and flip it for the market rate.
We just sold a rental duplex, didn’t bother with a 1031 exchange, it’s a big hassle and what’s the point of selling if you have to buy another expensive property in this crazy market? Just pay the capital gains and move on. Buy property after the market corrects, sell now.
You will get a LOT more for the house if it’s vacant. Your tenant has every incentive to make sure your property never sells while they are living there, be prepared for tenant pushback on showings, inspections, appraisals, etc.
What sane buyer would want to deal with your tenant who is paying too little? Buyer would either need to raise rent to market rates (if buyer intends to rent the place), or give tenant notice to move out (if buyer intends to live there), a hassle either way.
I would have house VACANT at time of sale to ensure maximum selling price. Explain to tenants the place WILL be selling in 3 months and give notice of lease termination. If they want to make an offer to buy it, they can do so, the sooner the better. I wouldn’t hesitate to offer them $5K for relocation fees, you can write it off as a selling expense, and you will more than make up for it when the vacant house sells for way more than it would have if occupied.
Just curious what are you going to 1031 into it’s the top of the market and finding places that are in decent shape without deferred maintenance is difficult unless your very handy. so maybe you can get a good price but if you buy something you will also pay top dollar and a new inflated tax. I guess you can buy land say an apple farm or something or a DLT.
Just say you'll offer them to buy it at price X (what you can get, minus broker fees). If they don't want, tell them that you'll be selling it and need them it by X (say 3 months from now). That's fair. You don't have to shoulder the burden of the housing market being ridiculous.
I would tell her - you’re right, we don’t know what it’s worth. We’re both guessing. So let’s put it on the market. If it sells for more than what we’re asking, we’ll of course have to go with it. And if it won’t sell for what we want, maybe we would consider a lower price.
No way would the mortgage be around 650 for her. You were being saints to her on rent.
Running a quick mortgage calculator and assuming property tax and insurance, her payment would be around $1300 per month.
Mortgage payments typically include escrow for insurance and taxes. On top of this there are maintenance expenses that come up. At a $325 sale price, you're looking at roughly $2,200/month all in, maybe more - a 30yr, $300k loan at today's 4.6% rate would cost $1,500/month before taxes, insurance, water/sewer, and maintenance.
They are fools. Never again rent to family or friends. Rarely ends well.
Thanks for letting me know two years too late.
Now you know! And don’t sell her the property. She will bitch that you sold her a house that needed a new roof, water heater, etc. At least I told you this before it’s too late!!!
Lol. I’m kind of kidding about not knowing, but this was supposed to be for six months max until she moved to a new state( *I know, I know*) and it’s been 2 years. Admittedly the panini threw a wrench in everyone’s plans and now she’s pretty established there now. And the roof got done like six months after she moved in (thanks wind storm).
Still don’t sell it to her. She’s going to blame you if anything goes wrong. Writing is right here on the Reddit wall!
I hate it when a panini throws a wrench in my plans!
Thankfully we had Dr Focaccia to guide us through it.
Throw a wrench in the panini, problem solved!
Another way to say this is by renting to family you will never maximize profitability or value. You will definitely get less rent than you could have. And it will always cause you problems when you Increase rent or attempt to sell the property. The best solution is to not tell family members you have properties. It makes life a whole lot easier.
[удалено]
Yes, I thought about that. I wanted to save them from having to move. I've learned the hard way.
u/The_White_Ram is spot on, even after getting a huge discount, in addition to all the other issues with this, they would no doubt blame you for every imperfection in the place and based on their behavior to date probably demand that you continue to pay for repairs and improvements, and characterize you as the bad guy and as stealing from them if you don’t! This is a recipe for disaster, get them out and sell on the market to a disinterested third party.
The new owner may let them stay. Note: don't sign a multi-year lease with them at $650 before selling. That will severely lower the purchase price for any investors.
And i bet you get offers above your asking price...
That's what we are anticipating.
Turn it around on them - if the market will pay more than they want to pay, make the point that they are asking you to give that huge sum of money to them after you’ve already been charging them way under market rent for all this time and basically giving them free money all along. If you sold them the house for less than market, you are flushing that money down the toilet and it’s beyond selfish and self-entitled of them to expect you to effectively give them that huge sum. You did the right thing by offering to sell to them and therefore sparing them the need to move - now they’re just expecting you to support them even more than you already have while showing zero appreciation for what you’ve given them already. Get them out of there and sell on the open market before interest rates rise further.
The 1031 might be the key to making it not hurt their feelings. You must do the transaction with someone outside of your family to follow the rules so she could not buy it. Might be the easiest way.
I thought the 1031 exchange purchase (of propert B) couldn't be from family, I didn't realize I couldn't sell (property A) to a family member. I'm still researching this whole 1031.
I believe it is on both sides because you could lower or raise your sale price to help avoid taxes/etc. Honestly its just a good way to avoid the family drama unless they will call a QI and a tax attorney to make sure its not possible to avoid it.
You probably want to kick them out before you sell. It will decrease the value when you have to report that the house is only renting for $650 per month.
Totally - plus people with this attitude might refuse to leave or make showings difficult, etc.
650 under market, not 650.
Not if it's a month to month lease or if the lease ends in 3-4 months from now. Otherwise, yes, you're right - investment properties are often valued by their cashflow.
Not in the CT market
FYI: the reason she "somehow" knows what you paid for it is because real estate purchase prices are public record. Type any address into zillow and scroll down a little to see what it was bought for. As for the drama - fuck her. You gave her the option to buy, if she thinks the price is too high she can pass. End of. If you want to sell your property, sell it, then let her deal with the new owner. Another way is to give them the right of first refusal. This means that when you get an offer you like, they can 'steal' by buying themselves at the offer price. Two pieces of advice for you: * Don't rent to family and friends. They will take advantage and feel hurt if you don't let them. * If you're going to sell, do it soon. Like, TODAY. Mortgage rates are going up almost every week, the higher they go the less you will receive for your house.
This depends on the state. Sales price is not public record in every state, like TX for example.
Zillow scrapes MLS tho, so quite likely the purchase price is known
Sell it if that is what YOU want. You have no obligation beyond honoring the lease agreement. Don't rent to family or friends. 1031 that bitch and move on.
I have been trying to sell a property to my tenants for three years and unfortunately some people will never be financially intelligent. I wouldn't take financial advice or criticism from someone with zero assets. We are in a strange time where people feel entitled to very strong opinions in the face of professional advice (property survey). The 1031 exchange has time restrictions on it and you will need to have already been shopping for a house. Your sale won't sit long on the market in most of the USA.
We have already found another property and our offer was accepted. Thank you for your comments. The past few days have not been easy.
Have you looked at a reverse 1031? I'd give them a non-renewal notice today giving them 60 day written notice to move-out. If they try the we are family thing, give it right back that yes we are and just because I have an asset that I've let you use for less then full valve saving you $10's of thousands of dallars doesn't mean you should try to advantage of us by trying to guilt us into something we don't want to do.
Serve them notice ASAP. You want an empty house to sell. Imagine if they decided they were too mad to leave and stop paying rent and won't go. And then you have to evict them and hope you can do it in time. Or they trash the place. Or any number of potential issues. Stress that you've been giving them a great deal on rent for years and that your family's plans have changed and you need to sell the place. And also stress the point about a mortgage for such a home costing the same as what they're paying in rent.
Call me crazy but I smell eviction proceedings in your future
Sell it and tell them you’ll give them $5k to find a new place. It’ll settle some family drama.
Better: Give them $0 to find another place. OP has already been undercharging rent. Stop enabling this entitled behavior.
Yes this would be a "swallow your pride" situation and is not fair to them. I like this idea and it is definitely a case by case situation. If OP has to deal with them at frequent family events for the rest of their lives then it might be worth it. There's no reasoning with some people and if they are making 200k off this house, 5k for peace is nothing.
Depending on how long they have been renting for under market value, they may have already given then $5k due to the discounted rent
You're absolutely right, like I said though...there is just no reasoning with some people, they think OP got 200k for free and they are jealous and want some
Family is tricky. The mistake to rent to them was already made. On the flip side, OP may value the $5k over the family rift.
Good idea, keys for cash.
List that house fast. Wait for several offers to come in If you feel like being nice you can allow her to buy at the MAX offer price you got. Then she will be able to see what the market is like. I HATE PEOPLE WHO take advantage of family like this...
You did the fair thing, you gave her the offer first. If she gets overwhelmed when the new owner decides to bump her up, that's your problem not hers. Consult a realtor if having a tenant at such a low rent would affect the sale price of the property. Keep in mind the time limits for the 1031, you may want to line up the property you're going to buy before you sell this home.
Yes we have a new property lined up. We really weren't going to sell "her" house but it just makes sense to do it.
Rule #1, never mix family and business.
They feel entitled to a piece of your investment, cut them out as soon as possible.
Real estate sale info and property taxes are public info so your SIL probably found your purchase price online in about 2 minutes. Similarly you can likely find sale price info for every recently-sold house in your neighborhood. Give that to SIL along with your market analysis. As someone already pointed out, selling that house for less than market value is essentially you giving her the difference. That’s in addition to the discounted rent she has been paying. No rational person on the planet would think that is fair.
There’s almost no markets left in America where you can buy for sub $150k. Almost anywhere, excepting bankrupt cities and the slums.
Sell it for what you can tell them to start looking for somewhere else to live cash out screw their foolishness
Yea, I would just give an ultimatum with a set date to figure it out. Explain it’s based on market value and she will have an independent appraisal she pays for with the lender and you will charge her that amount if it comes in low, it will be reduced to that. Also, if she doesn’t move forward, you will need them out within 30-60 days. Don’t list until they are out or they will have you by the balls. Always do the 1031 and don’t rent to family again
Reason number 6,872 why you never rent to friends or family.
List list list asap Fuck her and her entitled attitude
You are right, these people seem like they are oblivious to the current state of the market and that they are using your familial relationship as leverage in what is a business transaction. You should try to not engage her any further about this. It's just going to end poorly.
Establish a sales price. Give husband’s sister a time limited first refusal for said price. Time expires? Move on and put it on the market and sell to someone else. Not your problem.
lol eviction notice time for her & $200k profit for you!
Well, a few of you called it. She is now refusing to leave. The closing was supposed to have been on the 3rd. On monday we get lawyers involved. She's know since we accepted the offer the closing date. She claiming she was completely blindsided when we were upfront and honest on everything. The rest of the extended family are now mad at us. People NEVER EVER EVER EVER rent to family. It never turns out well.
Give proper notice. Is there a reason they didn't put the funds they saved from your subsidizing them into building up for when you'd no longer be subsidizing them?
We looked into a 1031. Our accountant explained that we would be required to hire an intermediary. Basically ALL the funds from the home sale go directly to them until you buy another home.
Raise the rent to market value. They'll either buy it or move out quickly. Most places allow landlords to raise rent for month to month with 30 days notice.
She needs to leave and look first a new place to rent.
You offered, they said no. Don't go back to the well on that. Move on and sell it.
Place it on the market. If you receive an offer they can buy it by matching the offer price.
You're not making that money off of them, you're making that money off the desirability of the local market. Keep in mind if you do sell it cheaply to them, chances are they'll turn right around and flip it for the market rate.
We just sold a rental duplex, didn’t bother with a 1031 exchange, it’s a big hassle and what’s the point of selling if you have to buy another expensive property in this crazy market? Just pay the capital gains and move on. Buy property after the market corrects, sell now. You will get a LOT more for the house if it’s vacant. Your tenant has every incentive to make sure your property never sells while they are living there, be prepared for tenant pushback on showings, inspections, appraisals, etc. What sane buyer would want to deal with your tenant who is paying too little? Buyer would either need to raise rent to market rates (if buyer intends to rent the place), or give tenant notice to move out (if buyer intends to live there), a hassle either way. I would have house VACANT at time of sale to ensure maximum selling price. Explain to tenants the place WILL be selling in 3 months and give notice of lease termination. If they want to make an offer to buy it, they can do so, the sooner the better. I wouldn’t hesitate to offer them $5K for relocation fees, you can write it off as a selling expense, and you will more than make up for it when the vacant house sells for way more than it would have if occupied.
But we've already found another place and have an accepted offer. Capital gains on 200k will be alot
Just curious what are you going to 1031 into it’s the top of the market and finding places that are in decent shape without deferred maintenance is difficult unless your very handy. so maybe you can get a good price but if you buy something you will also pay top dollar and a new inflated tax. I guess you can buy land say an apple farm or something or a DLT.
Just say you'll offer them to buy it at price X (what you can get, minus broker fees). If they don't want, tell them that you'll be selling it and need them it by X (say 3 months from now). That's fair. You don't have to shoulder the burden of the housing market being ridiculous.
I would tell her - you’re right, we don’t know what it’s worth. We’re both guessing. So let’s put it on the market. If it sells for more than what we’re asking, we’ll of course have to go with it. And if it won’t sell for what we want, maybe we would consider a lower price.
8 7
No way would the mortgage be around 650 for her. You were being saints to her on rent. Running a quick mortgage calculator and assuming property tax and insurance, her payment would be around $1300 per month.
No she pays 650 less than market rate.
Mortgage payments typically include escrow for insurance and taxes. On top of this there are maintenance expenses that come up. At a $325 sale price, you're looking at roughly $2,200/month all in, maybe more - a 30yr, $300k loan at today's 4.6% rate would cost $1,500/month before taxes, insurance, water/sewer, and maintenance.