# Helping MIL buy a house but stays in our name



## Addy (Mar 12, 2010)

We own two houses, one rental and one principal residence. My mother in law currently pays $1000/m for a two bedroom apartment in Surrey, BC. She is widowed, her mother recently passed way and most of her friends have moved to Vancouver Island near Victoria. She has about $150,000 inheritance coming to her probably around April or May of 2014. Because of her low income (small pension and DIB) she does not quality for much of a mortgage. My husband and I are contemplating "going in" with her on a house purchase, somewhere around $400,000 near Victoria with a mortgage helper. We are not naive, we have helped other family members purchase homes before but in this case, if the MIL has income, her DIB will drop accordingly, plus an additional $187/m she will lose due to owning a house.

We want to help her out but also don't want to get screwed if she doesn't pay her mortgage. We are trying to find a way where we can help her, with as little risk as possible, and still benefit ourselves from the house purchase. For us, it would be nice to retire on the island so my initial thoughts are some day either sharing the house with her (one stay in the mortgage helper, the other rent the main level or whatever is best at the time), or, if she goes before we retire in about 14 years, we would rent the house out and move into it when we retire.

The house would be in my husbands name and possibly my name (to be determined), but not MIL’s.

We would set it up so MIL is a tenant, with a legal rental agreement, etc. Plus I was thinking if we had MIL deposit all rent, and income into an account accessibly by only us, we could pay the bills and give her whatever cash is left over. We would also require her to put at least 20% down on the house (ie $80K) plus have a contingency fund of at least six months rent (whatever the rent is for the income suite). This would cover months where the unit is not rented, and occasional repair bills. We would also insist she put aside a certain % each month towards regular maintenance, and would insist the house be insured properly, etc. There are still risks, MIL could change her direct deposits and keep all the money, and not pay her share of the rent, but we would make doubly sure she knew that is she defaulted on her rent she would be treated like any other tenant. This may sound harsh but I don’t want to give a little or she will take advantage.

If it weren’t for the fact that I would like to retire on the Island, and there is a benefit to us in that we would own the house I would say no, but with these considerations I’m tempted to look into it more. I’m curious to hear any thing we’re missing, any thing we should consider that clearly I’m not thinking about, both good and bad.


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## none (Jan 15, 2013)

Just rent a house.


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## the-royal-mail (Dec 11, 2009)

So you would take on all the liability and risk from the sounds of it. And would be on the hook to enforce the rules you described above.

The benefits for you are not sufficiently high IMO to get involved with such a high-expense scheme.

I do understand the whole thing with trying to help family out but it seems to me the liability in cases like this is a turn off. I prefer for people to be responsible for their own housing.

My bridge solution when I was in a similar situation was basically an interest-free loan, paid back to me afterwards. This way they have all liability and responsibility for house purchase, maintenance and bills but I still helped them out get started. It's their house. My name appears nowhere on any documentation and that's the way to go IMO. The biggest risk was not being paid back the money that was owed to me but at least I am not perpetually legally liable.


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## Charlie (May 20, 2011)

I don't see the advantage to you or MIL here unless you think the time is ripe for an investment on the island just now....or there are non financial issues at play.

Cost of capital and maint costs for a $400K home will be more then your MIL is paying in rent now. She could probably rent for less on the Island. If you were looking to buy another rental there, and MIL would be a good caretaker, then maybe you crunch the numbers.


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## MoneyGal (Apr 24, 2009)

What Charlie said.


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## Karen (Jul 24, 2010)

> ...This may sound harsh but I don’t want to give a little or she will take advantage.


The above quote indicates that you don't consider MIL to be trustworthy; to me, that says it all - don't enter into any business arrangement with her. If you do, you're just asking for trouble.


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## Beaver101 (Nov 14, 2011)

I wonder what the MIL or her son thinks of the business angles described or outlined above ... "her" $150K inheritance would be nice for a lifetime rental instead of being bounded by the terms of her DIL's business arrangement. Besides she ain't going to be able to take the house with her.


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## Addy (Mar 12, 2010)

All truth, and no, she is not trustworthy, she has proven that many times over. My thoughts were basically she can pay the rent or if she doesn't, the house will be sold. It's clearly not that cut and dry, but in a nutshell that is what I was thinking. I agree, it's not the best idea, and thankfully, it's just a thought at this point. There has to be a solid attraction for us to get involved, and what TRM said, it's probably not a sufficient benefit for the risk involved.


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## kcowan (Jul 1, 2010)

Addy
You have no idea what will happen to the housing market on the island. You have 14 years to figure that out. By then you might prefer a property in Palm Springs. You are trying to find a way to leverage her housing needs. Why not let sleeping dogs lie?
Keith


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## MRT (Apr 8, 2013)

Assuming you are ok with the risks...

You could follow through on your idea to purchase a home with a 'mortgage helper' and set MIL up as a legal tenant.

Rather than have her pay rent to you on a monthly basis, why not have her pay you a lump sum for a year at a time? It can easily be setup as mutually beneficial:

- you get a year's worth of rent up front, which you can invest in whatever manner is suitable for you.
- MIL gets a reduction on rent for paying the entire year up front (e.g. one month, or a half-month, free). 

You reduce your risk of default by collecting up front, and you could even have her keep a 2nd year's rent in non-cashable investment as a condition of the home purchase. Repeat the process each year so that you're paid up front and next year's rent is locked away. This gives you PLENTY of financial wiggle room if things go bad.

maybe that is all overly optimistic, but if you are thinking of going down this path, there are measures you can take to protect yourselves AND that benefit her.


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## FrugalGuy (Oct 25, 2013)

Addy said:


> We own two houses, one rental and one principal residence. My mother in law currently pays $1000/m for a two bedroom apartment in Surrey, BC. She is widowed, her mother recently passed way and most of her friends have moved to Vancouver Island near Victoria. She has about $150,000 inheritance coming to her probably around April or May of 2014. Because of her low income (small pension and DIB) she does not quality for much of a mortgage. My husband and I are contemplating "going in" with her on a house purchase, somewhere around $400,000 near Victoria with a mortgage helper. We are not naive, we have helped other family members purchase homes before but in this case, if the MIL has income, her DIB will drop accordingly, plus an additional $187/m she will lose due to owning a house.
> 
> We want to help her out but also don't want to get screwed if she doesn't pay her mortgage. We are trying to find a way where we can help her, with as little risk as possible, and still benefit ourselves from the house purchase. For us, it would be nice to retire on the island so my initial thoughts are some day either sharing the house with her (one stay in the mortgage helper, the other rent the main level or whatever is best at the time), or, if she goes before we retire in about 14 years, we would rent the house out and move into it when we retire.
> 
> ...


Things change and 14 years is such a long time and who knows what can happen. Too many uncertain variables here.


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