Parents are willing to buy a 2 bedroom in NYC for around $400-600K with the intention of letting me live there. I would pay rent to them and would gain equity value in the apartment. It would be up to me to keep the other room occupied with roommates/maintain it. I'm 22 so the thought of committing to something like this is a bit daunting. Parents currently commute from CT to NY so their positive takeaway is having access to the apartment on an "irregular" basis. If I wanted to up and leave my parents would be okay with that and I would own whatever percentage I put in - they would start leasing it.
Pros:
Rent would be relatively cheap
Less "Money out the window"
Opportunity to invest in an asset (future CF)
Cons:
Less flexible in moving neighborhoods/change of scenery
Price range is ok for now but I may want to live in something nicer down the line
Real Estate volatility - lose value
Possibility of Parent intrusion
This is something I have been discussing seriously with my Parents and would save me a lot of money. I am interested to hear any opinions on whether or not this is a good idea, please don't get hung up on the finer details. I also understand how incredibly fortunate I am to have parents willing to do something like this.
Wait how does the equity value work? Are you paying extra every month on top of your rent in order to build equity? Or are they taking your rent payment, and matching a portion of it to build equity (essentially free equity?)
We will have to work out the details but essentially it would be "free equity". The rent would go towards paying the mortgage (or cash sum) and I would get a small % each month. I'm basically in a win-win situation but still want what's best for my parents. Posting this question on WSO to see if there are any risks/market insight that the regular finance pleb (me) wouldn't be aware of.
The long play would be to accumulate a few properties - would form a company if it got to that.
Scenario 1: Rent on 2 bdrm = 2000 per month
Get a girlfriend to room with you and pay you 1000, and rent out the other room for 1300. Net $300 per month and air bnb it out when you’re not there.
Or rent out both bedrooms and charge enough to afford living someplace nicer at a discount
bumpski for the morning crowd
"If I wanted to up and leave my parents would be okay with that and I would own whatever percentage I put in."
Given this, it sounds like none of your cons - except parent intrusion - even apply. You have the flexibility to change scenery or upgrade down the road, and you don't even have to go to the hassle of selling your place. You're worried that the value of the property may fall?? The value of your equity in a rental property is always zero. What's the downside here?
This is a sweetheart deal. You don't need to save up a down payment and your housing costs are now an investment instead of an expense. As long as your parents are reasonable people who won't abuse this arrangement, you should absolutely do it. Get on the same page now regarding all the particulars (ie how does your equity accrue, how do you get your money out?) and go for it.
Thanks for the validation. I guess my only real hang up is the added long term responsibility. I'm leasing a new place starting soon so well have at least a year to plan and find the right place - plenty of time to make sure we don't botch it.
This is a good idea.
For what it's worth, if you ask my father what his greatest regret is in parenting, he won't mention divorcing my mom or splitting my family up or anything - he'll mention how much money he wasted on rent when my siblings and I were in college and now he should have just bought a place.
Having rich parents has very few downsides.
Why would you not do this? You’d be turning down free money and missing out on having a landlord that is persuably emotional invested in your success. If parental intrusion becomes a problem you could always just talk to them about it and ask them to stop.
Agree with the users above that is a great idea.
Assuming you will eventually work in NYC, being able to live in a place that will be cheaper than market values is already a win, plus you will be getting equity out of every rent payment you make to your rents (pun intended).
NYC property values will only increase from here on so that leaves the doors open for other options as well (sell, AirBnb, rent, etc)
Everyone says it's free money. My parents have offered to do similar. But it's not really. Unless you have a ton of sibilings, odds are that money will be yours one day. Do you think that money will grow more in the apartment or just by simply being in the market with the way the economy is now? Unless your parents would just be sitting on it in cash
Lol. I guess you're not wrong. But I think most people don't look at waiting for your parents to die as an investment.
It's not waiting for them to die, and I know it sounds morbid. But I think it's better to look at it like it's your own. Not take the free money cause parents assume the risk because really you're assuming the same risk if that makes sense?
If you put money 'in the market' (I assume you mean stocks) you could also argue that you're getting in at one of the worst/riskiest times with respect to price volatility/markup. At least with real estate, it has intrinsic value as a real/physical asset, and provides shelter in a real sense as well as from a tax/fiscal perspective.
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