[Livin Large]

Both my parents passed this year and I got a letter in the mail yesterday about my parents Annuities. It doesn't say how much the policies are worth and it will be split 9 ways so I'm expecting $8-10,000.

I'm going to take it as a lump sum (unless you convince me otherwise). I'm thinking about using the money to start an LLC with my daughter and buying a rental property together. I'll front most of the money because she will be doing most of the work as we live in different states Ohio/Louisiana. We found a nice looking duplex for $60k that currently rents for $700/month. After the note it will be almost $400/month to put into a "fix it" fund and to grow until we have the down payment for another property.

I don't need the money to live off of, I already have 2 rental houses in my name alone, I'm maxing out my 401k. Neither my husband or I have an IRA or a ROTH account. I was thinking it would give my daughter a way to earn some "passive" income in years to come and an alternate source of retirement income for me.

Any thoughts, ideas or suggestions??

 

[old guy]

I'm thinking about using the money to start an LLC with my daughter and buying a rental property together. I'll front most of the money because she will be doing most of the work

Well, that would be breaking most of the rules of landlording - ie, First Rule, never rent to an acquaintance, a coworker, a friend, and NEVER EVER to a relative, always have a formal arm's length agreement with a stranger. And that rule can be stretched to include picking a realtor, a lawyer, a contractor, a car repair person, etc.

Additionally, when I had a group of rental houses, I felt that handling the business investment individually was good. Eg, if I wanted to defer painting house #3 until next year, I didn't have to get agreement with partners. Plus a legal partnership wasn't needed (that defined what happens when one partner wants to liquidate, gets married, gets unmarried, dies, yada.)

But in your case, it isn't really an "investment", more of a mom-daughter-together adventure. There will be disagreements, but not blowouts - and DD will learn a lot (maybe you will too?) And it could be fun. :vs_closedeyes:

BTW, why on earth would you aspire to prepay $200k of real estate equity in 4 years (or ever?)?. Locking your available capital into real estate ownership makes it inaccessible (you can't convert it to cash when you need it most), plus your return is only what the net mortgage rate is. In general. US mortgages is one of the best sources of low coast capital in the world, ie fixed rate for 30 years, 4% to 6%. I keep mortgaes forever, I refi'd regularly, and I invested that money elsewhere.

 

[Livin Large]

Good things to think about! I'm not renting to her but with her. My thinking is that this money is her inheritance albeit early. Let her grow it as big as she wants responsibility for - 2 houses, 8 houses, 100 houses. I'll be mostly hands off and help her as she needs it/wants it. I agree that it will be a great learning experience for her and maybe me too. I want my name on the business so when I travel to see her the trip will be a tax write off - business trip. CPA told me the only other way to reduces my taxes is to start a business.

To say that investing is not my strong point is an understatement. With everything going on in our country I'm rather hesitant to invest IRAs and 401k. I do, but I'm not comfortable with it. Also, I can't easily do rental investments where I am because my job could move me tomorrow or in 10 years. I've done long distance renting - with great success and the another time...well...it was BAD! Guess I need to do some research and maybe talk to an investment person.

Thank you again for things to think about!!

 

[electro-wiz]

I own several rental properties. I would never do it with someone else. If you insist on doing it with your daughter make really sure that you have a clear agreement in writing who is responsible for what. What happens if one of you wants out of the deal?

The return on investment on this property according to the numbers that you give is not very good. If you pay $60,000 and get $700/month for rent, after paying taxes, and repairs you will be making like 3-5%. Why not just put your money into mutual funds?

It sounds like you are planning to getting a mortgage on the property? If so most of the time you will have to come up with a 25% downpayment.

 

[josantoro]

I was a landlord once and I have to say, NEVER AGAIN!!! Just takes one bad tenant deciding not to pay rent, and there go your profits. Depending on the state it can take MONTHS to get them out.

 

[nodmicks]

I own 2 rentals and would also not want to own one with anyone else. The second one is a duplex and half rented. We redid the outside and other half of the duplex. Even with the 2% rule since we got it for a steal we are flipping it.

I love all our family dearly but will never mix $ and family in a business or investment. If you really want your $ to be for you daughter why dont you let her invest it herself as she sees fit and give it as a gift? We use the 2% rule for rentals to see if they are worth it. In your scenario it doesn't seem like a great return on investment unless there is more to the numbers we dont see. I could very well be wrong but out CPA told us we could not deduct mileage and trips unless we qualified as an investment professional. This meant 700 documented hours that passed the govs test. Many things dont count towards this.