A relative had asked me to buy a house for investment. We’d put same amount (saying $50K) each for down payment and rent it out, and we’d split/earn everything equally. Saying if get $1,800 rent – $1200 utilities and mortgate payment, we’d get $300/month. Sound fair except that he wanted to be the “renter” meaning his family’ll live in that house and pay me $300/month. Sound fair but kinda bugging me is that he get to live in the house while I’m not. Is it really fair or not??? Hope my question not too confusing
thanks
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Him living there shouldn’t be an issue in that it is just an investment for you and you are making the same money whether he is renting it or someonen else is.
However, this is a bad idea. You don’t want to have a relative as a paying tenant. If he gets behind in the rent, are you going to be able to evict him?
Also, let’s say that rents in your area improve and you could now expect to rent that house to a stranger for $2,200 per month. Will you be able to raise the rent when his lease is up? He won’t agree to it I’m sure, and he has a 50% vote in the matter. So he keeps the sweetheart deal and you wave goodbye to another potential 200 per month (your share).
Just not a very good idea at all, no matter how you put it all together. I would only agree to it if you both agreed that no relations of either family could rent the property.
1st. Make him sign a lease if he wants to live there with you having the authority of the property manager. Buy the property in the name of an LLC and setup the LLC so that you have the authority.
2nd. Before you think this would be all profit, what happens when you need to make some capital expenditures? If you are making $300 per month and you need to replace something worth $5,000, how profitable is that property now? Oh yeah, don’t forget taxes in your equation.
I wouldn’t be comfortable doing this unless I was considered 51% owner of the entity which purchased the property.