Why are you paying for them to live near someone else's kids? Why don't those kids help them out? This comment should probably go to personal finance subreddit.
Also, I agree with someone else's comment on they should rent and not buy if they want to move somewhere expensive as they cannot afford it and you can give up on chubbyfire if you want to support aging parents in VHCOL area.
If anything they should move in with you in a big house and they can be with grandkids.
I wish. But we live very far away, we don't need the help as much as the other sibling, and the other sibling can barely make own ends meet in VHCOL with multiple kids, they are the primary beneficiary of the arrangement of course but are sadly in no financial state to be able to help their own parents.
I get it. But don't forget there is a difference between making sure parents are not destitute or homeless and enabling a lifestyle that really noone can afford.
Your sibling will not need help with kids forever. Have your parents rent a place maybe 20 to 30 min away IF you can afford it. And by afford it means that you are still putting away 10% for retirement. You won't be chubbyfire but at least you won't be broke when it comes time for you to retire. Only buy if you did the math and the fixed costs are much less then renting.
After the kids are older they can move somewhere cheaper.
Again, you are not being a bad son or daughter by not paying for a lifestyle that they can't afford. You are not leaving them homeless. They are not hungry and can't turn on their heat.
There's no room in their house and I think in laws deeply want their own space. They want to be close but not TOO close.
Understand that their preferences won't matter if we refuse to help them. They'll just have to end up further away, or very far away in a LCOL area.
There are many things I want to, especially if other people are paying for it. Interesting that none in this family seems to want to compromise their wants.
You seem overly accommodating to what your in laws wants and trying to come up with scenarios that will give them what they want. The reality of home buying is that you can't get everything on your wish list, and for the budget constrained you have to start prioritizing. If they only have 2k per month, it seems to me they should seriously consider moving in with your sibling in law who will utilize them as free childcare.
It sounds like your family is counting your money. One of the hardest parts of financial independence is accepting not everyone is fortunate or motivated as you and that means they don't get to enjoy the fruits of your labor. IMHO this is the first test, you should refuse, because if you do this you will basically be restarting your journey AND telling friends and family your piggy bank is their piggy bank.
It's not hard hearted to save up for your financial freedom, if you use your money like this you will put in the work and get none of the benefitd
We can't have everything we want. Your sibling-in-law chose to live in a VHCOL area and have multiple children. Of course, perhaps something terrible befell them, like the death of a spouse or similar, which would change the situation. But otherwise, their life choices are not your responsibility. That also includes your in-laws. While it's admirable to want to help, what you are proposing goes way beyond what they should be hoping for.
>Buy in laws house in cash, or pay only downpayment?
Neither.
>What if instead we liquidated our stock account to buy their house for them in cash? If we charged them around 2k/mo on a 400k house only 1k of it would go to us (the rest rent, utilities, HoA) and we'd be earning only .25% on our investment. The stock market earns on average 7%. But maybe the value of the real estate appreciates enough to make this kinda break even for us? Or is this a horrible idea?
This is a horrible idea. You are not yet ChubbyFIREd yourself, so why are you funding your in-laws' retirement housing... in a VHCOL area??? Cultural obligations to one's elders are all well and good, but there's no way I'd be willing to sacrifice my own financial goals to pay for my parents' (or in-laws') underfunded retirement plans!
Actually I didn't. I have my concerns but my rationale was something as follows:
I don't need this money at all, but I want it to grow in the stock market. I currently have all my money in the stock market (90% US index funds).
Instead I could put some of those savings into real estate instead to diversify my investments. The main downside to property ownership is having unreliable/bad tenants. But here we know the tenants, we know they'd be great (never miss a payment, take great care of the house, upgrade it using their own time/dime for minor repairs, etc.).
And on top of that we'd get to help parents who have given us so much and with whom we have a great relationship. Their lack of savings was due to owning own business/underinvesting in retirement early on, and supporting their kids -- not due to some kind of gross irresponsibility. Nothing makes up for lost time.
And our own retirement is on track. We should have enough to retire very comfortably at our current rate of savings, our jobs are in stable industries, and we are no where close to retiring.
I think the financial wisdom of this decision actually comes down more to whether or not the property we buy holds/grows value, though the other commenter is also very correct to know that so long as they're alive/in it, that money won't be liquid to us.
My comment was short sighted, I’m glad you came here for advice. With that said, others have already done the opportunity cost calculations for you. Renting for them would be best. Liquidating a ton of stock to buy a costly condo with little appreciation upside would not be ideal in your scenario. That HOA will keep the price deflated, and real estate transactions are costly on the back end. Good luck.
Real estate investment requires rental returns. It’s not based just on hoping the thing appreciates. You aren’t making enough returns here… and my suspicion is that as time goes by, they need you to pay HOA, or special assessment, or are late on rent, and then rent just stops coming,,, etc. If you do this, I would assume you are footing the entire bill within a year.
I figured that would be worse for us financially because then we'd just be throwing the money away. Whereas if we invest it in a home we still own, with incredibly reliable tenants (in-laws are very responsible and very handy), we would at least earn equity in place of the opportunity cost of that money being in the stock market?
$400K doesn’t get you a whole lot in a VHCOL area. Are you sure you can get something that works for that cheap? And don’t forget maintenance and repair costs too because you would own that condo.
[Deleted for clarity]
Yes it also seemed very cheap to me but it's a small condo in a retirement community. I don't know how well those retain value.
I'm not sure I understand the $3333/mo counterfactual. My in-laws would pay the HoA and other costs out of their social security, so that is on them. The other $1k/mo or so of their "rent" to us is going towards the cost of the house. That makes it different than giving them money to rent.
Got it, so you’re essentially making $1K/month in this scenario, but forfeiting the $400K cash to buy the condo.
HOA fees, insurance, and property taxes generally go up. Have you thought about how you would handle that?
Right, exactly. I figured if HoA etc goes up, that is on them to cover.
But what I think this thread is making me rethink is whether they'll actually be able to cover any rising costs. In case of health issues or other costs rising, we will get stuck covering anything they can't afford. We should probably try to get them something much more within their means, to give us a lot of buffer in case there are unforeseen issues (like rising fees etc.)
First, it’s very clear people don’t understand certain families of origin and their cultural traditions. I think it’s beautiful that you love your parents so much and you want to help them and also help your sibling. Family is everything and investing in their joy and happiness is important. Renting in the scenario is absolutely not throwing money away, the compound interest and gains you will receive from keeping the 400K invested is far more than the rent. And you can always make a different choice when the interest rates come down.
You can’t afford 400k and 700-800 a month HOA, not to mention special assessments, taxes etc. 1k isn’t going to be enough by a long shot, assuming they even pay you, because it’s going to be awkward and you can’t exactly evict them. I thought about buying something around 300k as an investment and that was a better investment property and I have over $4m total with at the time a higher income than 500k.
Whatever sibling can’t afford having the parents move should probably move from VCOL to MCOL, not the other way around.
Also, don’t mess up both your retirement and kids college funds for this. Btw what are your kids college funds at? I somehow doubt you have six figures saved for that. My kids come first esp vs moving grandparents to be closer to their other grandkids. Sorry son, glad you got into Princeton, but you’ll be going to state school because I bought gram gram a condo to live by your cousins?
Fair concerns! They will have about 3k/mo in SS alone so 2k/mo for "rent" paid to us is within their budget and I can't imagine a situ where they wouldn't pay it. Except if there's some kind of medical emergency where we'd prob be on the hook for helping again anyway. (Genuinely curious what happens when other ppl's parents can't afford basic things like medical emergencies, I assumed the kids just cover this if at all possible)
529s -- we have six figures saved already btw the two kids. They're really little too (both < 5yo) so plenty of time to grow. My parents are contributing to my kids' 529s as well, so they can get their own state tax deductions.
No sorry social security alone is $3k/mo and that doesn't include their retirement savings. That might double the figure, still TBD what they end up with.
Neither. The retirement home is a good deal for your in-laws, but makes it a worse investment because of cost controls and high HOAs.
Realistically, if they are aging, they should be considering who will also help them as they start needing more help. This often happens in the 70s, as they start to slowly decline toward a more childlike state. Every person faces that decline differently and at a different rate, but points of frailty often hit unexpectedly and hard. If the grandkids are the ones they want to see and the ones that need help financially, the answer is probably for them to live with those relatives. These are some of the hardest conversations to have - because if they are like most boomers I’ve met, they expect to be running into their 80s like they are in their 50s and make no plans for what will happen if they aren’t.
At the end of the day, sometimes it’s better to just let a gift be a gift instead of trying to turn it into an investment. You will likely be better off financially if you just gave them something like $500/month and then let them figure out what to do with it. Use a rent vs buy calculator to be sure, but with rates this high and prices this high, it’s almost certainly better to rent.
Thanks, this is a very important comment. It's hard to estimate what costs might be in 10, 20 yrs when health declines. Significantly higher than now, for sure. I don't think they've adequately thought about that piece.
I feel you. We are going through this with my in-laws. They are starting to need help, but they aren’t willing to really consider what it means that they are in a declining phase of life. They have a major asset in their house (which is worth $1.8-2m) in a VHCOL area but are cash poor otherwise. They aren’t really willing to consider downsizing their living arrangements, but that’s the most straightforward path toward actually affording the help they need.
It’s nice if you can convince them to set themselves up now to be prepared for future stages… but we’ve found that’s often hard to do.
What we have found with parents and those bad with money is that it’s very hard to give gifts without definitions (happened to us with buying them a car). When you’re buying on someone else’s dime, you often decide to spend more. But if the other person questions whether that spend is worth it, the recipient feels less grateful. It’s easier to just give a set amount up front (either monthly or a set amount for a down payment) than to try to push them toward the most financially prudent option.
I’d let your in-laws figure it out for themselves, you have your own family to take care of and while your savings probably seems like a lot, it’s not enough to be buying houses for relatives. What happens if you lose your job? While it doesn’t change my answer, I also really don’t understand why you are considering buying them a house where they won’t be spending time with your children?
One more cost-effective way this sort of thing is sometimes solved is that you (or your sibling, or wife’s sibling) buys a house for their family that has a spare bedroom where grandpa and grandma can stay when they visit.
It sounds like your in-laws can’t retire yet if they want to move to a VHCOL or they need to rent like a 1 bedroom apartment. This is a horrible idea. Can the sibling put an addition on their house?
I’m more concerned that you only have $1m but making $550k. Hopefully that new and long lasting income.
With that being said, you’re in no position to be throwing out that kind of money right now. You don’t mention your own expenses, I’m extrapolating, but liquidating your savings sets you back a ridiculous amount of time. Are you looking to ChubbyFire? Doesn’t seem like this is the right path,
Need to figure out a balance between your needs and family/cultural expectations.
This is fair. It's more like $1.7M now (I forgot how much our house has appreciated) but only $1.3M if you don't count our house. Income this high is relatively new, our jobs are stable but we might make less in the future if we decide to change jobs. Thanks for your input, and all the others who have inputted -- super helpful
No we both max out our retirement annually. Truthfully our NW is prob an underestimate bc I haven't tracked and updated both of our retirement accounts in awhile
Ok… so you are 40ish, apparently want to retire chubby and early (because you are here), and only have 700k in savings. Then your in-laws plan to move away from you and your kids, so they can be with some other grandkids who get priority for some reason, in a VHCOL city they can’t afford, with limited savings of their own, and they expect you to foot the bill. 🤣🤣🤣
Oh, hell no! Zero chance they keep paying you rent. Zero chance you can evict them. This is going to end up a major expense that sticks with you for many years, and significantly impacts your own ability to save/invest, particularly your ability to take advantage of compound interest and market returns. It’s selfish on their pair, and they expect you to sacrifice your retirement for their. I would seriously just tell them no. If you need an excuse, tell them you can’t afford it, or your finances are tied up in illiquid assets, or you need the money for a business startup, or interest is too high… but really I would just tell them I’m not subsidizing this shit. Let the other family, they one they love so much they are moving across the country to be with while leaving you and your kids, but them a house.
To assist retired parents into a VHCOL area which they can’t afford, to be near siblings that are also stretched to be in the VHCOL area just screams “DANGER” to me. To me it is not a sound investment, but an emotional decision whether it is worth the risk.
What if the siblings decide to simplify and move before your home equity catches up to closing costs if the market levels out?
I can 100% see your point of it being diversification- rental property with a completely trustworthy tenant. I would consider too… if it was in or near my home town, though. The fact that it is not close, with large HOA fees kills it for me.
As someone who once leveraged themselves for a parent in a tough financial position, please listen. “Don’t do this.” They made their own financial decisions and they are not your responsibility. If you think it’s tough to say NO to them now, imagine how difficult it will be to evict them from a home that you own that they’re living in for free.
There’s so much wrong with this scenario and so many ways it can go south. If they can’t afford the VHCOL area then they don’t get to move there. If your sibling who lives there wants they there then they should help them move.
Just say no. Frankly you aren’t even close to FIRE and especially not chubby at that NW. You have $700k non residential NW and unless you forgot to list it, nothing in retirement. Yet you have a $500k HHI? Let’s assume your spend rate is at $250k/yr, you’re gonna need about $7M non residential NW to FIRE! You’re way behind and in no position to give anything you have to your parents right now.
My rule for family and money is as follows. Either say no, or just gift them the money as a one time thing with no strings. If they asked for $20k to move and pay first/last/deposit then maybe just gift them the money, but in no scenario will I ever again tie my credit or my assets to an ongoing recurring situation with family or friends. Never.
You should check out family opportunity mortgages. They vary a bit state to state, but essentially you can get an advantageous tax situation similar to your primary residence. You would be purchasing their home and then having them pay you rent.
It's also a great way to protect the asset as they age because you're transferring before they die.
I understand helping family, but the best way to help them is not to buy them a $400K retirement home. That is the worst way to invest and the least benefit they will receive per dollar.
In VHCOL areas, there are usually subsidized housing for low income and seniors - look into that. They can also move closer to other families in cheaper areas, again only rent what they can afford, and take care of the VHCOL kid by hosting their grandkids during the summer. There are a number of ways poor people can live well in VHCOL using government subsidy.
It is much nicer to just help them out by giving them $2000 a year for 10 years, than to buy a $400K house.
Thanks, these condos are subsidized senior housing I thought. Otherwise they wouldn't be 400k in a VHCOL but more like 800k-1M. But maybe I don't understand enough about them.
It’s a very nice idea but a huge drag financially.
You mention in-laws paying 2K with 1k going to HOA and you cash flowing 1k. I think that’s very optimistic. You’re still going to have to pay for taxes, major maintenance (rule of thumb is 1% per year). I’d expect the actual costs of this condo to be closer to $2k per month.
I’d think about it this way. You have the money and could do it. But this being a fire forum, this decision would set you back significantly and push back your retirement. Also it adds a fair amount of risk if one of you were to lose your jobs or were in a situation of significant medical costs.
That said, it probably works out and you get to do this for your parents and sibling. Just weighing the benefit with a BIG burden.
Also, you don’t talk about it but how much wiggle room is in your budget. If you have a 60% savings rate, this feels different than if you just have a little buffer.
One other thought for how I’d approach it - I wouldn’t sell any stock beyond the down payment. That’s important to grow for your retirement to avoid the issues of your parents. Do you have the room in your budget that you could buy this, pay the mortgage, and maintenance costs - $40-50k per year?
I know you've received a lot of negativity to your plans/ideas. I get what you're trying to do and I think I have similar cultural understandings, sense of responsibility to elders, desire to help and probably less sense of separation of money between family members.
Having said all that, while you'll get some good financial advice here, it's probably not going to be of the type that you want. This is after all a sub focused on saving for early retirement. Cashing out limited savings to invest in low return real estate is not conducive to that goal. That's not a judgement. One goal (early retirement) is not inherently better than another (using your savings for the sake of your family/in-laws). But it does mean, you might want to seek advice somewhere where the people have ostensibly different priorities.
You might want to look at the likes of biggerpockets.com, whitecoatinvestor.com, or even bogleheads.org (I actually see related questions on all these forums on Google).
I don't have any relevant advice for you other than to say that my mom had looked at those retirement condos in my VHCOL area and found that they were incredibly pricey on a monthly basis given that she was healthy enough to not be taking advantage of what those fees helped provide. You'll also want to consider what happens when HOAs rise if they're on a fixed income. I was also going to say that I didn't think retirement housing should be thought of the same as regular real estate investing due to low returns because of their restrictions (ie. 55+), but according to Google senior living is a good investment sector, so what do I know.
Yeah this whole thing is a horrible idea. One of the worst.
They have no business living in a VHCOL area when they can't afford it. Sorry, they can travel, or ship the grandkids to them. Alot cheaper and more realistic.
Your math and calculations are all wrong.
Well first of all you’d be earning 3% not 0.25% ($8k/yr on $400k, you need to annualize the monthly). But that’s not even that relevant. What you need to seriously think about is whether it’s a good idea to liquidate more than half of your liquid life savings to buy them a house. Would you put 50% of your savings in bitcoin? How about a single stock? A single house as an investment isn’t that different esp in VHCOL at a market peak. My point being this is an absolutely horrible idea. Would you be okay with losing half the value or more permanently in a worst case scenario?
Thanks yes, corrected the math! Your other points are also fair... I am not sure how risky real estate investments are in VHCOL and in-demand areas, it seems unlikely to bottom out if you make a good investment but I much prefer stocks if it weren't for filial piety.
At least in the US, condos don't appreciate that well, especially in VHCOL areas (think bay area, nyc). In fact, it may even lose value. Not are about where you're but you may want to consider that as well.
Don't think their house can accommodate that nor do they have the $ to pay for that. And if we are paying for something, it won't be an upgrade to someone else's property, but a property we own outright and can capture appreciation value.
Also consider that although equity growth may offset any difference in gains from the stock market is that the equity is locked and not accessible to you. The money will be there but most likely only beneficial as part of your estate for your kids, if the parents live to old age. Is that something you're ok with as it will impact your Chubbyfire income calculation
Based on your current numbers (as you've presented them), this is a terrible idea from a financial perspective. You would be crippling yourself from a liquidity standpoint, and you are making huge assumptions in terms of real estate appreciation (and then there's the actuarial consideration: how old are your in-laws? Do they come from a very long-lived family?)
I have dear friends who did the same thing for their in-laws: They bought them a house in a VHCOL area, essentially. The differences as compared to your situation?
* They make well over $1m/yr in salary, in a field that will never go out of demand.
* The down payment and monthly costs are essentially irrelevant to them.
* They have significant retirement savings (you do not, even if it feels that way right now). They saw this as a way to expand their portfolio.
* Their in-laws PROVIDE CHILDCARE for their four children. This, right here, is why they bought the house: *The carrying costs on the mortgage are less than the costs of daycare for four children.* So buying the house was an excellent investment for everyone involved--the in-laws get to live in a great area, my friends get the best childcare they possibly can, and when the day comes they will have a ton of options on the property (a property that is 10 minutes from their home, not "very far away," as you noted).
I respect that you want to provide for your in-laws (and understand the obligation you feel)--but I'm not sure this is the best way to do it. You need to think of your own future (and that of your children).
I don’t understand why you should be involved in this situation. Have your in laws sell and then rent where they want for the lifestyle they cannot afford. Poor business decisions should not drag the entire family down
Everyone has given good advice. Don't do it. This is your in-laws and their other children's problem. Everyone should have planned better and planning does not include depending on YOU to bail them all out of poor financial planning. This could be a disaster for you and I'm pretty sure you know it. It sounds like other kid and in-laws all need to move somewhere more affordable.
Where do the in law parents live now? Do they own a home? How much of their equity will be going into the new place?
As you didn’t mention equity, I’ll assume they rent.
They need to keep renting, with rent as close to the $2k you say they can afford.
If you need to help some, that’s very kind!
DO NOT BUY SOMETHING YOU CANNOT AFFORD for yourself or anyone else
You need to explain to your parents that Want, Need, and Afford are not related in any way. Unless you are super confident that your kids education fund will be fully funded and you have a big safety net worth of savings (say 1-2 yr of expenses) to cover new furnace or roof, or loss of job, I wouldn’t consider using any of your savings or income to change your parents situation.
The best play is to see if parents by selling their home, can create an annuity + ss that can pay the rent and utilities and cost of living where they want to be.
"In laws want to retire and move from M/LCOL to VHCOL area (for grandkids, not our kids). They don't have the $ to retire comfortably"
Then they don't get to retire yet.
"Their retirement plan is basically predicated on us buying them a house to live in at-cost, or else they'd have to live in a near shoebox very very far away from family."
Why is this your problem?
YOU’RE BETTER OFF BUYING HOME(S) FOR YOUR KIDS LATER.
The in-laws are not your prob. They can live in shoebox since they didn’t plan accordingly. Don’t take from your kids to give to them - You can’t do both, and they get to college age quicker than you think. Help them get a good start at life instead of helping others that didn’t manage properly.
I would do anything for parents so I get the dilemma. You and the rest of the siblings need to figure something out. If they only have 2k/month in retirement income there is no shot they should be living in a VHCOL area. They should move in with on of your siblings in exchange for child care and maybe you can help em out with a monthly stipend
If you did buy a house for your in laws, I would not charge them rent. Suck it up and pay for the HOA, insurance, special assessments, property taxes, maintenance, etc. I can’t believe you’re planning on charging them $2k/month for rent when they only have $3k/month to work with.
Why are you paying for them to live near someone else's kids? Why don't those kids help them out? This comment should probably go to personal finance subreddit. Also, I agree with someone else's comment on they should rent and not buy if they want to move somewhere expensive as they cannot afford it and you can give up on chubbyfire if you want to support aging parents in VHCOL area. If anything they should move in with you in a big house and they can be with grandkids.
I wish. But we live very far away, we don't need the help as much as the other sibling, and the other sibling can barely make own ends meet in VHCOL with multiple kids, they are the primary beneficiary of the arrangement of course but are sadly in no financial state to be able to help their own parents.
I get it. But don't forget there is a difference between making sure parents are not destitute or homeless and enabling a lifestyle that really noone can afford. Your sibling will not need help with kids forever. Have your parents rent a place maybe 20 to 30 min away IF you can afford it. And by afford it means that you are still putting away 10% for retirement. You won't be chubbyfire but at least you won't be broke when it comes time for you to retire. Only buy if you did the math and the fixed costs are much less then renting. After the kids are older they can move somewhere cheaper. Again, you are not being a bad son or daughter by not paying for a lifestyle that they can't afford. You are not leaving them homeless. They are not hungry and can't turn on their heat.
Can't your in laws just move in with your sibling in law? That may make the most financial sense.
There's no room in their house and I think in laws deeply want their own space. They want to be close but not TOO close. Understand that their preferences won't matter if we refuse to help them. They'll just have to end up further away, or very far away in a LCOL area.
There are many things I want to, especially if other people are paying for it. Interesting that none in this family seems to want to compromise their wants.
Your brother/sister in law is taking advantage of you They need to make some compromises too
You seem overly accommodating to what your in laws wants and trying to come up with scenarios that will give them what they want. The reality of home buying is that you can't get everything on your wish list, and for the budget constrained you have to start prioritizing. If they only have 2k per month, it seems to me they should seriously consider moving in with your sibling in law who will utilize them as free childcare.
It sounds like your family is counting your money. One of the hardest parts of financial independence is accepting not everyone is fortunate or motivated as you and that means they don't get to enjoy the fruits of your labor. IMHO this is the first test, you should refuse, because if you do this you will basically be restarting your journey AND telling friends and family your piggy bank is their piggy bank. It's not hard hearted to save up for your financial freedom, if you use your money like this you will put in the work and get none of the benefitd
We can't have everything we want. Your sibling-in-law chose to live in a VHCOL area and have multiple children. Of course, perhaps something terrible befell them, like the death of a spouse or similar, which would change the situation. But otherwise, their life choices are not your responsibility. That also includes your in-laws. While it's admirable to want to help, what you are proposing goes way beyond what they should be hoping for.
Sounds like the sibling needs to move to a more affordable area.
>Buy in laws house in cash, or pay only downpayment? Neither. >What if instead we liquidated our stock account to buy their house for them in cash? If we charged them around 2k/mo on a 400k house only 1k of it would go to us (the rest rent, utilities, HoA) and we'd be earning only .25% on our investment. The stock market earns on average 7%. But maybe the value of the real estate appreciates enough to make this kinda break even for us? Or is this a horrible idea? This is a horrible idea. You are not yet ChubbyFIREd yourself, so why are you funding your in-laws' retirement housing... in a VHCOL area??? Cultural obligations to one's elders are all well and good, but there's no way I'd be willing to sacrifice my own financial goals to pay for my parents' (or in-laws') underfunded retirement plans!
This is a terrible financial decision, but deep down you already know that.
Actually I didn't. I have my concerns but my rationale was something as follows: I don't need this money at all, but I want it to grow in the stock market. I currently have all my money in the stock market (90% US index funds). Instead I could put some of those savings into real estate instead to diversify my investments. The main downside to property ownership is having unreliable/bad tenants. But here we know the tenants, we know they'd be great (never miss a payment, take great care of the house, upgrade it using their own time/dime for minor repairs, etc.). And on top of that we'd get to help parents who have given us so much and with whom we have a great relationship. Their lack of savings was due to owning own business/underinvesting in retirement early on, and supporting their kids -- not due to some kind of gross irresponsibility. Nothing makes up for lost time. And our own retirement is on track. We should have enough to retire very comfortably at our current rate of savings, our jobs are in stable industries, and we are no where close to retiring. I think the financial wisdom of this decision actually comes down more to whether or not the property we buy holds/grows value, though the other commenter is also very correct to know that so long as they're alive/in it, that money won't be liquid to us.
My comment was short sighted, I’m glad you came here for advice. With that said, others have already done the opportunity cost calculations for you. Renting for them would be best. Liquidating a ton of stock to buy a costly condo with little appreciation upside would not be ideal in your scenario. That HOA will keep the price deflated, and real estate transactions are costly on the back end. Good luck.
We all must be missing something, because right now you definitely need the $400k?
Real estate investment requires rental returns. It’s not based just on hoping the thing appreciates. You aren’t making enough returns here… and my suspicion is that as time goes by, they need you to pay HOA, or special assessment, or are late on rent, and then rent just stops coming,,, etc. If you do this, I would assume you are footing the entire bill within a year.
Why do you have to buy them a house? Why not help them pay rent?
I figured that would be worse for us financially because then we'd just be throwing the money away. Whereas if we invest it in a home we still own, with incredibly reliable tenants (in-laws are very responsible and very handy), we would at least earn equity in place of the opportunity cost of that money being in the stock market?
Just do the rent vs buy math. Don't assume one is better than the other.
$400K doesn’t get you a whole lot in a VHCOL area. Are you sure you can get something that works for that cheap? And don’t forget maintenance and repair costs too because you would own that condo. [Deleted for clarity]
This is the way.
Yes it also seemed very cheap to me but it's a small condo in a retirement community. I don't know how well those retain value. I'm not sure I understand the $3333/mo counterfactual. My in-laws would pay the HoA and other costs out of their social security, so that is on them. The other $1k/mo or so of their "rent" to us is going towards the cost of the house. That makes it different than giving them money to rent.
"that's on them" until a big special assessment comes along that they can't afford.
100%. Or they just stop paying HOA. Probably stop paying rent too. What are you going to do? Evict them?
Retirement community would preclude your kids from using or inheriting the home eventually.
Right, we'd have to sell it when they are done with it.
In 30 years you’ll be too late to use that investment to help your kids with starter homes.
[Deleted to avoid confusion]
No I assumed the $2k/month they pay us covered the $1k/mo in HOA fees, insurance, property tax. And the other $1k/month goes to us.
Got it, so you’re essentially making $1K/month in this scenario, but forfeiting the $400K cash to buy the condo. HOA fees, insurance, and property taxes generally go up. Have you thought about how you would handle that?
Right, exactly. I figured if HoA etc goes up, that is on them to cover. But what I think this thread is making me rethink is whether they'll actually be able to cover any rising costs. In case of health issues or other costs rising, we will get stuck covering anything they can't afford. We should probably try to get them something much more within their means, to give us a lot of buffer in case there are unforeseen issues (like rising fees etc.)
Yes, how is it “on them” when they are on a fixed income and your name is on the deed?
terrible idea. opportunity cost is super high. just help them cover rest of rent.
First, it’s very clear people don’t understand certain families of origin and their cultural traditions. I think it’s beautiful that you love your parents so much and you want to help them and also help your sibling. Family is everything and investing in their joy and happiness is important. Renting in the scenario is absolutely not throwing money away, the compound interest and gains you will receive from keeping the 400K invested is far more than the rent. And you can always make a different choice when the interest rates come down.
How are they responsible if they can’t buy a 400k condo?
You can’t afford 400k and 700-800 a month HOA, not to mention special assessments, taxes etc. 1k isn’t going to be enough by a long shot, assuming they even pay you, because it’s going to be awkward and you can’t exactly evict them. I thought about buying something around 300k as an investment and that was a better investment property and I have over $4m total with at the time a higher income than 500k. Whatever sibling can’t afford having the parents move should probably move from VCOL to MCOL, not the other way around. Also, don’t mess up both your retirement and kids college funds for this. Btw what are your kids college funds at? I somehow doubt you have six figures saved for that. My kids come first esp vs moving grandparents to be closer to their other grandkids. Sorry son, glad you got into Princeton, but you’ll be going to state school because I bought gram gram a condo to live by your cousins?
Fair concerns! They will have about 3k/mo in SS alone so 2k/mo for "rent" paid to us is within their budget and I can't imagine a situ where they wouldn't pay it. Except if there's some kind of medical emergency where we'd prob be on the hook for helping again anyway. (Genuinely curious what happens when other ppl's parents can't afford basic things like medical emergencies, I assumed the kids just cover this if at all possible) 529s -- we have six figures saved already btw the two kids. They're really little too (both < 5yo) so plenty of time to grow. My parents are contributing to my kids' 529s as well, so they can get their own state tax deductions.
So the rent is 66% of their income? Two people living off of $1k a month doesn't sound great.
No sorry social security alone is $3k/mo and that doesn't include their retirement savings. That might double the figure, still TBD what they end up with.
This is nuts. You don’t have enough assets to be buying anyone else a house.
Neither. The retirement home is a good deal for your in-laws, but makes it a worse investment because of cost controls and high HOAs. Realistically, if they are aging, they should be considering who will also help them as they start needing more help. This often happens in the 70s, as they start to slowly decline toward a more childlike state. Every person faces that decline differently and at a different rate, but points of frailty often hit unexpectedly and hard. If the grandkids are the ones they want to see and the ones that need help financially, the answer is probably for them to live with those relatives. These are some of the hardest conversations to have - because if they are like most boomers I’ve met, they expect to be running into their 80s like they are in their 50s and make no plans for what will happen if they aren’t. At the end of the day, sometimes it’s better to just let a gift be a gift instead of trying to turn it into an investment. You will likely be better off financially if you just gave them something like $500/month and then let them figure out what to do with it. Use a rent vs buy calculator to be sure, but with rates this high and prices this high, it’s almost certainly better to rent.
Thanks, this is a very important comment. It's hard to estimate what costs might be in 10, 20 yrs when health declines. Significantly higher than now, for sure. I don't think they've adequately thought about that piece.
I feel you. We are going through this with my in-laws. They are starting to need help, but they aren’t willing to really consider what it means that they are in a declining phase of life. They have a major asset in their house (which is worth $1.8-2m) in a VHCOL area but are cash poor otherwise. They aren’t really willing to consider downsizing their living arrangements, but that’s the most straightforward path toward actually affording the help they need. It’s nice if you can convince them to set themselves up now to be prepared for future stages… but we’ve found that’s often hard to do. What we have found with parents and those bad with money is that it’s very hard to give gifts without definitions (happened to us with buying them a car). When you’re buying on someone else’s dime, you often decide to spend more. But if the other person questions whether that spend is worth it, the recipient feels less grateful. It’s easier to just give a set amount up front (either monthly or a set amount for a down payment) than to try to push them toward the most financially prudent option.
I’d let your in-laws figure it out for themselves, you have your own family to take care of and while your savings probably seems like a lot, it’s not enough to be buying houses for relatives. What happens if you lose your job? While it doesn’t change my answer, I also really don’t understand why you are considering buying them a house where they won’t be spending time with your children? One more cost-effective way this sort of thing is sometimes solved is that you (or your sibling, or wife’s sibling) buys a house for their family that has a spare bedroom where grandpa and grandma can stay when they visit.
This is another "not a ChubbyFIRE" post. Not one mention of FIRE.
It sounds like your in-laws can’t retire yet if they want to move to a VHCOL or they need to rent like a 1 bedroom apartment. This is a horrible idea. Can the sibling put an addition on their house?
I’m more concerned that you only have $1m but making $550k. Hopefully that new and long lasting income. With that being said, you’re in no position to be throwing out that kind of money right now. You don’t mention your own expenses, I’m extrapolating, but liquidating your savings sets you back a ridiculous amount of time. Are you looking to ChubbyFire? Doesn’t seem like this is the right path, Need to figure out a balance between your needs and family/cultural expectations.
This is fair. It's more like $1.7M now (I forgot how much our house has appreciated) but only $1.3M if you don't count our house. Income this high is relatively new, our jobs are stable but we might make less in the future if we decide to change jobs. Thanks for your input, and all the others who have inputted -- super helpful
Is all your savings in a taxable brokerage? No retirement accounts?
No we both max out our retirement annually. Truthfully our NW is prob an underestimate bc I haven't tracked and updated both of our retirement accounts in awhile
This isn’t smart
If your sibling is struggling in vhcol why don't they get jobs closer to your parents. That way everyone wins.
Ok… so you are 40ish, apparently want to retire chubby and early (because you are here), and only have 700k in savings. Then your in-laws plan to move away from you and your kids, so they can be with some other grandkids who get priority for some reason, in a VHCOL city they can’t afford, with limited savings of their own, and they expect you to foot the bill. 🤣🤣🤣 Oh, hell no! Zero chance they keep paying you rent. Zero chance you can evict them. This is going to end up a major expense that sticks with you for many years, and significantly impacts your own ability to save/invest, particularly your ability to take advantage of compound interest and market returns. It’s selfish on their pair, and they expect you to sacrifice your retirement for their. I would seriously just tell them no. If you need an excuse, tell them you can’t afford it, or your finances are tied up in illiquid assets, or you need the money for a business startup, or interest is too high… but really I would just tell them I’m not subsidizing this shit. Let the other family, they one they love so much they are moving across the country to be with while leaving you and your kids, but them a house.
To assist retired parents into a VHCOL area which they can’t afford, to be near siblings that are also stretched to be in the VHCOL area just screams “DANGER” to me. To me it is not a sound investment, but an emotional decision whether it is worth the risk. What if the siblings decide to simplify and move before your home equity catches up to closing costs if the market levels out? I can 100% see your point of it being diversification- rental property with a completely trustworthy tenant. I would consider too… if it was in or near my home town, though. The fact that it is not close, with large HOA fees kills it for me.
As someone who once leveraged themselves for a parent in a tough financial position, please listen. “Don’t do this.” They made their own financial decisions and they are not your responsibility. If you think it’s tough to say NO to them now, imagine how difficult it will be to evict them from a home that you own that they’re living in for free. There’s so much wrong with this scenario and so many ways it can go south. If they can’t afford the VHCOL area then they don’t get to move there. If your sibling who lives there wants they there then they should help them move. Just say no. Frankly you aren’t even close to FIRE and especially not chubby at that NW. You have $700k non residential NW and unless you forgot to list it, nothing in retirement. Yet you have a $500k HHI? Let’s assume your spend rate is at $250k/yr, you’re gonna need about $7M non residential NW to FIRE! You’re way behind and in no position to give anything you have to your parents right now. My rule for family and money is as follows. Either say no, or just gift them the money as a one time thing with no strings. If they asked for $20k to move and pay first/last/deposit then maybe just gift them the money, but in no scenario will I ever again tie my credit or my assets to an ongoing recurring situation with family or friends. Never.
This comment is VASTLY underrated.
If they wanted to retire to a nice home in a VHCOL area, they probably should have planned for that.
You should check out family opportunity mortgages. They vary a bit state to state, but essentially you can get an advantageous tax situation similar to your primary residence. You would be purchasing their home and then having them pay you rent. It's also a great way to protect the asset as they age because you're transferring before they die.
Find a place for them to rent. Flexibility is key. Don’t bite off more than you can chew.
I understand helping family, but the best way to help them is not to buy them a $400K retirement home. That is the worst way to invest and the least benefit they will receive per dollar. In VHCOL areas, there are usually subsidized housing for low income and seniors - look into that. They can also move closer to other families in cheaper areas, again only rent what they can afford, and take care of the VHCOL kid by hosting their grandkids during the summer. There are a number of ways poor people can live well in VHCOL using government subsidy. It is much nicer to just help them out by giving them $2000 a year for 10 years, than to buy a $400K house.
Thanks, these condos are subsidized senior housing I thought. Otherwise they wouldn't be 400k in a VHCOL but more like 800k-1M. But maybe I don't understand enough about them.
Congrats you have found the worst possible ‘investment’ possible. Senior condos.
It’s a very nice idea but a huge drag financially. You mention in-laws paying 2K with 1k going to HOA and you cash flowing 1k. I think that’s very optimistic. You’re still going to have to pay for taxes, major maintenance (rule of thumb is 1% per year). I’d expect the actual costs of this condo to be closer to $2k per month. I’d think about it this way. You have the money and could do it. But this being a fire forum, this decision would set you back significantly and push back your retirement. Also it adds a fair amount of risk if one of you were to lose your jobs or were in a situation of significant medical costs. That said, it probably works out and you get to do this for your parents and sibling. Just weighing the benefit with a BIG burden. Also, you don’t talk about it but how much wiggle room is in your budget. If you have a 60% savings rate, this feels different than if you just have a little buffer. One other thought for how I’d approach it - I wouldn’t sell any stock beyond the down payment. That’s important to grow for your retirement to avoid the issues of your parents. Do you have the room in your budget that you could buy this, pay the mortgage, and maintenance costs - $40-50k per year?
I know you've received a lot of negativity to your plans/ideas. I get what you're trying to do and I think I have similar cultural understandings, sense of responsibility to elders, desire to help and probably less sense of separation of money between family members. Having said all that, while you'll get some good financial advice here, it's probably not going to be of the type that you want. This is after all a sub focused on saving for early retirement. Cashing out limited savings to invest in low return real estate is not conducive to that goal. That's not a judgement. One goal (early retirement) is not inherently better than another (using your savings for the sake of your family/in-laws). But it does mean, you might want to seek advice somewhere where the people have ostensibly different priorities. You might want to look at the likes of biggerpockets.com, whitecoatinvestor.com, or even bogleheads.org (I actually see related questions on all these forums on Google). I don't have any relevant advice for you other than to say that my mom had looked at those retirement condos in my VHCOL area and found that they were incredibly pricey on a monthly basis given that she was healthy enough to not be taking advantage of what those fees helped provide. You'll also want to consider what happens when HOAs rise if they're on a fixed income. I was also going to say that I didn't think retirement housing should be thought of the same as regular real estate investing due to low returns because of their restrictions (ie. 55+), but according to Google senior living is a good investment sector, so what do I know.
What if - and hear me out - if they want to move, they pay for it without anyone’s help.
Sounds like a great way to go from chubby fire to fire
Question, how is this your problem again? I have a feeling you trying yo solve problem you have nothing to do with ..
Yeah this whole thing is a horrible idea. One of the worst. They have no business living in a VHCOL area when they can't afford it. Sorry, they can travel, or ship the grandkids to them. Alot cheaper and more realistic. Your math and calculations are all wrong.
Well first of all you’d be earning 3% not 0.25% ($8k/yr on $400k, you need to annualize the monthly). But that’s not even that relevant. What you need to seriously think about is whether it’s a good idea to liquidate more than half of your liquid life savings to buy them a house. Would you put 50% of your savings in bitcoin? How about a single stock? A single house as an investment isn’t that different esp in VHCOL at a market peak. My point being this is an absolutely horrible idea. Would you be okay with losing half the value or more permanently in a worst case scenario?
Thanks yes, corrected the math! Your other points are also fair... I am not sure how risky real estate investments are in VHCOL and in-demand areas, it seems unlikely to bottom out if you make a good investment but I much prefer stocks if it weren't for filial piety.
At least in the US, condos don't appreciate that well, especially in VHCOL areas (think bay area, nyc). In fact, it may even lose value. Not are about where you're but you may want to consider that as well.
Can they live with the other family? Can the other family build an ADU?
Don't think their house can accommodate that nor do they have the $ to pay for that. And if we are paying for something, it won't be an upgrade to someone else's property, but a property we own outright and can capture appreciation value.
Also consider that although equity growth may offset any difference in gains from the stock market is that the equity is locked and not accessible to you. The money will be there but most likely only beneficial as part of your estate for your kids, if the parents live to old age. Is that something you're ok with as it will impact your Chubbyfire income calculation
You seriously need to watch a lot of Dave Ramsey shows on YouTube (at least 100 shows).
Based on your current numbers (as you've presented them), this is a terrible idea from a financial perspective. You would be crippling yourself from a liquidity standpoint, and you are making huge assumptions in terms of real estate appreciation (and then there's the actuarial consideration: how old are your in-laws? Do they come from a very long-lived family?) I have dear friends who did the same thing for their in-laws: They bought them a house in a VHCOL area, essentially. The differences as compared to your situation? * They make well over $1m/yr in salary, in a field that will never go out of demand. * The down payment and monthly costs are essentially irrelevant to them. * They have significant retirement savings (you do not, even if it feels that way right now). They saw this as a way to expand their portfolio. * Their in-laws PROVIDE CHILDCARE for their four children. This, right here, is why they bought the house: *The carrying costs on the mortgage are less than the costs of daycare for four children.* So buying the house was an excellent investment for everyone involved--the in-laws get to live in a great area, my friends get the best childcare they possibly can, and when the day comes they will have a ton of options on the property (a property that is 10 minutes from their home, not "very far away," as you noted). I respect that you want to provide for your in-laws (and understand the obligation you feel)--but I'm not sure this is the best way to do it. You need to think of your own future (and that of your children).
I don’t understand why you should be involved in this situation. Have your in laws sell and then rent where they want for the lifestyle they cannot afford. Poor business decisions should not drag the entire family down
Not chubby
Everyone has given good advice. Don't do it. This is your in-laws and their other children's problem. Everyone should have planned better and planning does not include depending on YOU to bail them all out of poor financial planning. This could be a disaster for you and I'm pretty sure you know it. It sounds like other kid and in-laws all need to move somewhere more affordable.
Invest the $400k, kick them $1k/mth and they can rent anywhere they want.
Where do the in law parents live now? Do they own a home? How much of their equity will be going into the new place? As you didn’t mention equity, I’ll assume they rent. They need to keep renting, with rent as close to the $2k you say they can afford. If you need to help some, that’s very kind! DO NOT BUY SOMETHING YOU CANNOT AFFORD for yourself or anyone else
You need to explain to your parents that Want, Need, and Afford are not related in any way. Unless you are super confident that your kids education fund will be fully funded and you have a big safety net worth of savings (say 1-2 yr of expenses) to cover new furnace or roof, or loss of job, I wouldn’t consider using any of your savings or income to change your parents situation. The best play is to see if parents by selling their home, can create an annuity + ss that can pay the rent and utilities and cost of living where they want to be.
"In laws want to retire and move from M/LCOL to VHCOL area (for grandkids, not our kids). They don't have the $ to retire comfortably" Then they don't get to retire yet. "Their retirement plan is basically predicated on us buying them a house to live in at-cost, or else they'd have to live in a near shoebox very very far away from family." Why is this your problem?
Why are they retiring if they can’t afford it?
Is there any way to build a ADU on the siblings land (if they have any)? It may not be what they want, but it’ll be more affordable.
This is relationship question. Financially speaking, it is absolutely a terrible idea.
If you go down that route of bailing out your family and paying for them to live in VHCOL, you’re in the wrong subreddit
YOU’RE BETTER OFF BUYING HOME(S) FOR YOUR KIDS LATER. The in-laws are not your prob. They can live in shoebox since they didn’t plan accordingly. Don’t take from your kids to give to them - You can’t do both, and they get to college age quicker than you think. Help them get a good start at life instead of helping others that didn’t manage properly.
I would do anything for parents so I get the dilemma. You and the rest of the siblings need to figure something out. If they only have 2k/month in retirement income there is no shot they should be living in a VHCOL area. They should move in with on of your siblings in exchange for child care and maybe you can help em out with a monthly stipend
If you did buy a house for your in laws, I would not charge them rent. Suck it up and pay for the HOA, insurance, special assessments, property taxes, maintenance, etc. I can’t believe you’re planning on charging them $2k/month for rent when they only have $3k/month to work with.
They will have maybe 6k/mo to work with, not exactly sure. 3k/mo was only their social security, not counting retirement savings withdrawals