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Old 11-22-2011, 04:33 PM
 
Location: Hinsdale, IL
110 posts, read 220,666 times
Reputation: 79

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If the only condition to getting the money is that you use it to purchase a house in the Chicago area or else you lose it, why not purchase the house for the full value of the amount that you're set to get and then turn around and sell the house, take the proceeds, and then use those proceeds however you see fit?
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Old 11-22-2011, 04:46 PM
 
28,393 posts, read 68,233,035 times
Reputation: 18205
Default If family is alive..

...this is a surefire way to cause a HUGE rift and probably get written out of further consideration.

The OP probably is better off just settling his mom into house temporarily. It is a HUGE hassle to move multiple times and try to get kids settled in one school for a couple of years, then move to west coast then move back.

The "right thing" to do by both immediate family and generous benefactors is not always the same as the most financially expansive thing.

While there are probably some folks that would disagree, I think you can apply "good fortune" to circumstance to situations like these and not risk the whole thing blowing up...



Quote:
Originally Posted by Chris_H_2 View Post
If the only condition to getting the money is that you use it to purchase a house in the Chicago area or else you lose it, why not purchase the house for the full value of the amount that you're set to get and then turn around and sell the house, take the proceeds, and then use those proceeds however you see fit?
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Old 11-22-2011, 04:49 PM
 
Location: Hinsdale, IL
110 posts, read 220,666 times
Reputation: 79
If it's a crazed relative as the OP describes, and if the will or trust or whatever allows for it, I'm not sure why the OP wouldn't just do what I point out considering there probably wouldn't be anything that would cause a huge rift. Nevertheless, it sounds like it's a good "problem" to have.
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Old 11-23-2011, 01:37 AM
 
Location: Living on the Coast in Oxnard CA
15,374 posts, read 25,686,247 times
Reputation: 19660
I guess it depends on the amount of the money being offered from the family member and if that amount is a percentage of the price of the home or some set amount. Everyone has a differant situation and to the OP yours is unique.

Something to consider is the size of the gift. Is the family member paying outright for the home, offering to pay a percentage of the price or are they paying the down payment amount. Is there a maximum amount of the gift? What are the tax implications? I wouldn't walk away from the deal. I would consider all options either way. After you have the home what would your out of pocket loss be at the worse case scenario? If you can absorb that or it still looks good at the end of the day then move on this deal.
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Old 11-23-2011, 08:01 AM
 
53 posts, read 90,840 times
Reputation: 33
OK, let's suspend reality and from a theoretical perspective let's say you have $150k plus funds available for closing costs available ($100k of which you would not otherwise have access to). Qualifying for a loan is no problem and making monthly payments are no problem. Let's further assume you are moving out of the country in 2 years or whatever, but you are not otherwise planning on purchasing a house. There is no magic boundary of where this house must be purchased, but you have elementary school aged children and would like to be in a good school district and have targeted certain areas that you personally would like living in for the next couple of years. After 2 years you can sell it, rent it or have a relative take care of it. From the feed back I have gotten the markets with houses that make a great personal residence don't necessarily make great rental properties. That the property taxes and upkeep of a rental are just not worth it for an absentee landlord. No one would make such an investment?? If you were to make such an investment of the markets previosly listed (Hinsdale, Winnetka, Lake Forest) are there any areas that are better for these circumstances or would you purchase something outside the City in a great school district for much less?

Last edited by krispro6; 11-23-2011 at 08:29 AM..
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Old 11-23-2011, 08:25 AM
 
28,393 posts, read 68,233,035 times
Reputation: 18205
You've changed the parameters enough that MAYBE somethings might make more sense. While $150K is a nice pile of dough it ain't $750k. The fact is there are homes that are probably worth buying for their land value and rental potential. Especially in the places that are bit on the fringes of where there is a mix of tear downs and more modest homes. I suspect that if you target a price range of about $300-400K you can snag a place that is suitable for a short-term home for yourself, mid-priced rental and eventually could be expanded / torn down for a more long term investment...

There are still some risks with this kind of situation, however the scope of your financial exposure would be quite literally HALF as great as going for the "long term home" now when you really don't need it. Granted the the details of getting a big pile of "free money" from a benefactor is the biggest factor that dials down the risk, but the simple fact that price stabilty in the starter home range has been VERY solid in the desirable suburbs...
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Old 11-23-2011, 10:13 AM
 
53 posts, read 90,840 times
Reputation: 33
Let's also assume there is no future plans to move back to Chicago after the initial 2 years. The beneficiary is still around and I would like to at least partially live up to the intent of the gift which is for the purchase of a family home, but ultimately our housing needs will be taken care (just assume this to be true) and we won't otherwise need a home until we are ready to retire (also assume this to be true) and we probably won't be retiring to Chicago, therefore, whatever house we purchase we will only live in for two years max. What is the best way to purchase a house suitable to live in for two years then sell it or rent it until it can at least be sold at a break even point? I did a quick search and see the below listing in Lake Forest:

360 Linden Ave, Lake Forest, IL 60045 MLS# 340603 - Zillow

There are pictures elsewhere and the house interior looks nice (but who knows). It's a foreclosure priced at $599,000 which Zillow values at $729,000 (I know Zillow can't be trusted). Am I totally crazy to think we could get this for $550,000 (or something like it) and then in two years try to sell it for $600,000 (get the $100,000 gift) or if not try to rent it out for $3,000 until it could be sold? If the house has to sit vacant we would still be able to make payments as we aren't paying for a house elsewhere.
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Old 11-23-2011, 10:37 AM
 
10,309 posts, read 12,461,508 times
Reputation: 6019
This is stupid. Just talk to a realtor.
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Old 11-23-2011, 01:34 PM
 
53 posts, read 90,840 times
Reputation: 33
Wow, really? There is no undervalued real estate out there whereby you could hope to break even in a couple of years? I did talk to a real estate agent in Hinsdale when looking for a rental and all she could talk about was what great opportunities there were out there to buy - of course she wanted to sell me a house, not find a rental. I've watched a number of houses priced aggressively get snapped up in days (while others sit for months). There's gotta be something out there!
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Old 11-23-2011, 02:24 PM
 
53 posts, read 90,840 times
Reputation: 33
And as for keeping a house and renting it out, am I wrong to think that a house purchased now would be worth significantly more in 20 years or is the market that depressed? I'm not expecting to cover the whole mortgage with rental income, just to get into the market at a somewhat low point. I understand the point that it would be better to purchase a less expensive house (lower taxes, lower closing costs, lower selling costs when that time comes, etc). I would buy in the area where we live now, but again I'm thinking houses won't appreciate as much being an hour outside the city and it may ultimately be harder to sell.
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