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Author: rtc1135 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: rental home for parents for mortgage deduction? Date: 10/13/2011 11:20 PM
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My 85 yo dad and 65 yo stepmom live in a (fully paid for) 2 story home in South Bay area of Los Angeles. We've discussed them moving to a 1 story home while they are in good health, possibly taking advantage of the current lower price and mortgage rates. The problem is that with the poor real estate market, selling their 2 story home may be challenging. Also since neither are working, getting a mortgage may be iffy. They do own a small apartment complex from which they derive their main income but are hesitant to risk mortgaging it. Similarly, they hesitate to use up their liquid savings for the 1 story as then they would have no reserves.

I'm 55 yo and with my wife working full time (both living in GA), we're in the 33% federal tax bracket. Would it make sense for us to buy the 1 story home in LA and rent it to them for the mortgage deduction? They could in turn potentially remodel their outdated 2 story as a rental for some income.

If my parents want to contribute to the downpayment for the 1 story, how can we organize it so it's simplest (hopefully avoiding joint ownership)? One downside presumably is we'll have to file state income tax in CA (as well as GA). Are there other major pros and cons with this idea that I've not thought of yet? Welcome your critique.
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114117 of 121061
Subject: Re: rental home for parents for mortgage deducti Date: 10/13/2011 11:45 PM
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Welcome your critique.

As you wish. The good thing is getting them out of that two-story house while they can still adjust to change.

Aside from that this is one of the worst schemes I've ever seen proposed. You and your wife have no business being landlords of property 3,000 miles away. I've had 85 year old parents, and their situation can change in an instant. Suddenly you find yourselves not landlords to responsible people you know and love, but landlords to no one, trying to figure out what you do next.

I'm from Kansas, state motto: "KISS." If your parents can disabuse themselves of the notion that their house was ever really worth what it would have sold for at the peak of the bubble, IMO they'd be best off selling for what it's worth today, in its current condition or with a little easy cosmetic fixing up, and renting their housing. At this stage of the game it would be worth looking into retirement communities that offer a full range of options from independent living to full nursing care.

Phil
Rule Your Retirement Home Fool

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Author: AngelMay Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114118 of 121061
Subject: Re: rental home for parents for mortgage deducti Date: 10/14/2011 12:26 AM
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At this stage of the game it would be worth looking into retirement communities that offer a full range of options from independent living to full nursing care.

Phil
Rule Your Retirement Home Fool




Oh god, Phil. That is so depressing.
Which is not to say you are not right.
It's just that I'm looking that old age in the face myself.
So I know. It's just damned depressing.

We are trying to sell our house here in WA.
Would like to move to CA - to a house with NO STAIRS.
But so far... we might just as well not even have the house on the market because absolutely no one is looking. :(

This market sucks.

AM

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114120 of 121061
Subject: Re: rental home for parents for mortgage deducti Date: 10/14/2011 9:18 AM
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Phil's response is right on.

Does their current home have a downstairs bedroom? Even if there isn't, there are stair lifts that would allow access to the upper floor.

Your father is 20 years older than his wife. It is likely she will survive him. Who inherits which property? Does she have life tenancy in the property? If she does, who maintains the property? What happens when she is not able to care for him?

Phil is so right on things can change in an instant with an elderly parent. My 89 year old father appeared to be doing okay. He was refusing to see a doctor, and then he fell. The fall wasn't the problem, it was the cause of the fall. Even if he had seen a doctor earlier, the results would not have been different.

You are across the country. If they are going to move, then assisted living should be considered.

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Author: StockGoddess Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114135 of 121061
Subject: Re: rental home for parents for mortgage deducti Date: 10/15/2011 12:51 PM
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My mom's only in her mid-70's but she has lots of fairly un-sellable real estate. I dread the thought of having to handle her estate when she goes. She won't sell anything for "what it's worth now, not what it was worth during the bubble" to quote an earlier poster. (big sigh!) She was always a big believer that real estate would NEVER do you wrong and constantly tells me to get everything out of the stock market (nevermind that I don't keep all my eggs in one basket). She says she'll haunt us if we discount her properties too deeply, too.

So I'll probably get haunted.

I'd love it if she sold it all, somehow, and found a one-story rental. Simple!! But being a landlord her whole life, she refuses to ever be a tenant.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 114146 of 121061
Subject: Re: rental home for parents for mortgage deducti Date: 10/15/2011 3:34 PM
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I'll probably get haunted.

If it's any comfort, I resisted refrigerated pie crusts for years out of the same fear. I finally took the plunge, and I think everything's OK. Of course, I attribute the huge SIGH that I hear when I open the package to the vacuum seal being broken.

Phil
Rule Your Retirement Home Fool

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