Sell or Gift Rental (by Rich [TX]) Jan 10, 2019 7:08 AM|
Sell or Gift Rental (by S i d [MO]) Jan 10, 2019 7:29 AM
Sell or Gift Rental (by Richard [MI]) Jan 10, 2019 7:40 AM
Sell or Gift Rental (by plenty [MO]) Jan 10, 2019 7:48 AM
Sell or Gift Rental (by RB [MI]) Jan 10, 2019 8:00 AM
Sell or Gift Rental (by Busy [WI]) Jan 10, 2019 8:16 AM
Sell or Gift Rental (by Ed [CA]) Jan 10, 2019 8:22 AM
Sell or Gift Rental (by Deanna [TX]) Jan 10, 2019 8:26 AM
Sell or Gift Rental (by Salernitana [CA]) Jan 10, 2019 8:36 AM
Sell or Gift Rental (by AllyM [NJ]) Jan 10, 2019 8:42 AM
Sell or Gift Rental (by Robert J [CA]) Jan 10, 2019 9:12 AM
Sell or Gift Rental (by LindaJ [NY]) Jan 10, 2019 10:32 AM
Sell or Gift Rental (by Ken [NY]) Jan 10, 2019 11:37 AM
Sell or Gift Rental (by Landlord ofthe Flies [TX]) Jan 10, 2019 11:52 AM
Sell or Gift Rental (by BradJusW [TX]) Jan 11, 2019 7:34 AM
Sell or Gift Rental (by Jim In O C [CA]) Jan 11, 2019 7:42 AM
Sell or Gift Rental (by Robin [WI]) Jan 11, 2019 8:51 AM
Sell or Gift Rental (by Eddie [KY]) Jan 11, 2019 2:56 PM
Sell or Gift Rental (by Rich [TX]) Posted on: Jan 10, 2019 7:08 AM
Ok this may seem really simple but I have to ask, I'm sure some on this site have encountered this thought and just wanted some ideals on how to approach. What is the best way to introduce the actual everyday mechanics of operating rental property to child (17 yr old daughter). My daughter ask if she could manage a rental for me. I figured that since I'm currently paying some of her bills maybe I should sell or gift her a home to manage and let her start paying her own bills. --161.226.xxx.xxx
Sell or Gift Rental (by S i d [MO]) Posted on: Jan 10, 2019 7:29 AM
My understanding is that transferring ownership of an asset like this would have several important implications, a few of which are below:
1) Gift tax. You are allowed to make a gift of money or property to a child valued at $15,000 or less each calendar year without paying any gift tax. So if the house is worth $60,000 you could gift it to her over a period of 4 years ($15K per year) and no taxes would be due to the IRS.
2) Loss of stepped up basis. If you title a property, stock, or other assets into someone else's name, they get your original basis (cost paid, less depreciation). This means that if/when they sell the property, they will pay the capital gain on the sale prices minus the basis.
If you've had the property for awhile and it is fully or mostly depreciated, this could mean a large tax bill.
HOWEVER, if they INHERIT it from you after your death, they get a stepped-up basis, meaning at the time title transfers there is an appraisal done on the property and that becomes the new basis. So let's take a super-simple example and say you gave her a house that you paid $60,000 27.5 years ago. It is now fully depreciated to $0. If she sells it for $120,000, she would owe capital gains tax on the entire $120,000 sale price because she has zero basis (she got your basis...). However, if you leave it to her in your estate and she sell it within 6 months, she pays ZERO taxes on it because her basis is "stepped up" to the current value of the property.
There are likely more issues to consider, so I recommend consulting with a knowledgeable CPA who specializes in rental property, and perhaps also an estate planning attorney. Spending $200-$300 for a few hours of their time would be a great investment and could save your daughter $10s of thousands potentially.
Sell or Gift Rental (by Richard [MI]) Posted on: Jan 10, 2019 7:40 AM
What you're suggesting is a recipe for a problem.
Instead, why not take small steps. Let her co manage with supervision. When she proves by demonstrating that she is learning, slowly allow less supervision and, if it works, finally full management with your review.
To much too soon usually caused problems. --23.121.xx.xxx
Sell or Gift Rental (by plenty [MO]) Posted on: Jan 10, 2019 7:48 AM
my mom did this for me, I was a bit older, but she mentored me,,, the house deed stayed in her name, she signed the leases, but i did the rest and set up a bank account so I could see the numbers and deposit money and pay workers. --173.108.x.xxx
Sell or Gift Rental (by RB [MI]) Posted on: Jan 10, 2019 8:00 AM
Sell. Die broke and let the funeral check bounce. --184.53.x.xxx
Sell or Gift Rental (by Busy [WI]) Posted on: Jan 10, 2019 8:16 AM
Just want to say congratulations on having a daughter that wants to learn. Learning by doing was the 4-H motto that our kids grew up with, and it works.
Sell or Gift Rental (by Ed [CA]) Posted on: Jan 10, 2019 8:22 AM
Glad someone mentioned this. I have many peers who inherited rentals from their parents and sold them very quickly afterwards because they had bad memories of their parent's experiences with the properties.
I've recently started with my boys who are younger, but I pay them to help me do work on the properties so they understand the maintenance needs for a property. They now clean gutters and help trim trees, do re-habs, cleanups, etc.
Sell or Gift Rental (by Deanna [TX]) Posted on: Jan 10, 2019 8:26 AM
Your daughter is 17--- would that limit her ability to enter into contracts with people? When does she turn 18?
Likewise, I'd be nervous about allowing her to outright sink-or-swim manage. Not only does she have the dual dings against her of not just being (a kid) (a girl kid!) that would lead to tenants probably wanting to take advantage of her, but she doesn't necessarily have the experience of when x happens, I do y. No one gets experience by being wrapped in cotton-- but training wheels exist for a reason. :)
I'd definitely be open to a more guided process, where she gets exposed to various circumstances that crop up with tenants, and you walk through them together.
I'd also be curious as to what her geographic plans are. Is she going to college? Will it be in-town or out-of-town? I'd be hesitant to permanently gift anything like real estate to someone who is at that stage of life. It might be an awesome thing for two or three or four years... but if life is suddenly taking her to Waco or Alpine or something-- let alone New Orleans or Montana or Seattle or someplace-- then it will be a burden.
My rentals are in various single-member LLC's. I'll have to have a conversation later on tonight about the repercussions of how easy it would be to pass on to the kids, should any of them show an inclination for the biz. --96.46.xxx.xx
Sell or Gift Rental (by Salernitana [CA]) Posted on: Jan 10, 2019 8:36 AM
Rich, congratulations on your daughter's interest. Like what others have noted, perhaps you could mentor and help her if necessary until she's around 29? If she continues to have interest in managing the rental, you could transfer it to her via a trust-sort of deal as S i d and Deanna noted? --73.93.xx.xx
Sell or Gift Rental (by AllyM [NJ]) Posted on: Jan 10, 2019 8:42 AM
Not at seventeen. YOu would have to train her like anyone else unless she has been your sidekick for the past ten years. I would give her a task to do that is relevant to a building and let her do that. She could turn around and walk away from it at the first broken toilet. Don't do it. Did she earn it? No. I inherited twenty units but had been working on them for thirteen years before that happened and my age was mid forties and I have a graduate degree in business. --73.248.xxx.xxx
Sell or Gift Rental (by Robert J [CA]) Posted on: Jan 10, 2019 9:12 AM
I've seen the best and worse in children's receipt of their parents properties. As their contractor/handyman, if a parent won't educate and set up their family trust propertly, how could anyone expect their kids to continue on.
On parent with 43 properties lived to 93 years of age. Before their demise, they "exchanged" most of their holdings to Several Larger properties -- an 11 story office complex, a 100+ unit apartment house and a triple net retail commercial property. They they hired three managers to over see those properties and had one sight mangers also. An accountant to keep the records and fill out the taxes. Everything was still help under the parents trust so that the in-laws couldn't get a hold of the assets.
So the children and grandchildren just got their monthly checks without much work.
Other kids, after a few months of making the wrong choices like selecting tenants on whims and not based on income and credit, sold the properties at a fire sale just to distance themselves for being a landlord. --47.156.xx.xx
Sell or Gift Rental (by LindaJ [NY]) Posted on: Jan 10, 2019 10:32 AM
Way too young to sell or give such an asset to. Better that you hire her. Pay her for the jobs she is to do. She can set up a Roth IRA with some money. She can pay her bills, she can save and buy things she wants. At that age, even the best kids need guidance in all the aspects of LL and money management. You can take the time to discuss with her why you think xx is the best way to handle something and you can get her ideas on what she sees and what to do.
As for what is best for you.... you need to talk to an estate attorney and accountant. They can set things up for you that give you the best tax advantage and protect the assets. --108.4.xxx.xx
Sell or Gift Rental (by Ken [NY]) Posted on: Jan 10, 2019 11:37 AM
Keep the house but put her to work learning management,she can start answering the phones and speaking to the current tenants,she can start learning to write ads and make arrangements to screen tenants and show units,she can handle the rent and keep track of it etc.Speak to her weekly about what she learned,what she wants to learn,what she did right or wrong during the week etc --72.231.xxx.xxx
Sell or Gift Rental (by Landlord ofthe Flies [TX]) Posted on: Jan 10, 2019 11:52 AM
She's too young to officially sign documents, but why not hire her and let her take over some or most of your duties. Then you can hold her hand during the whole process and ease her into it. Throwing her in the deep end may end up making her hate it.
The best experience you could give her is the paperwork, budgeting, accounting part of the business. That knowledge would be valuable no matter what path her career took her.
My biggest fear with giving her a property on her own is her safety. She's a 17 year old girl dealing with all types of tenants, good and bad. She would be alone with unverified male strangers. Something bad could happen.
I'd also encourage her to get a concealed carry license if she's going to get into rentals at such an early age. Or at least carry mace and a knife. But best to buddy up with dad on site visits and showings.
Sell or Gift Rental (by BradJusW [TX]) Posted on: Jan 11, 2019 7:34 AM
When the time is right, you can quitclaim deed it to her, have it notarized, and deliver to the courthouse. It is the quickest and cheapest way I know of in Texas. --76.186.xxx.xxx
Sell or Gift Rental (by Jim In O C [CA]) Posted on: Jan 11, 2019 7:42 AM
17, wait till she is 27! --99.23.xxx.x
Sell or Gift Rental (by Robin [WI]) Posted on: Jan 11, 2019 8:51 AM
How about if you hire her the way you would a property manager? Draw up a contract where she gets 6-10% of the NET profit. That will encourage her to operate in an efficient, economical way. Give her the responsibilities, and teach her how to handle each one. I think it's GREAT that she wants to learn, and starting with a single rental is a good way to start. Wish I'd had someone to guide me along the way! --204.210.xxx.xxx
Sell or Gift Rental (by Eddie [KY]) Posted on: Jan 11, 2019 2:56 PM
when she is 18 sell it to her on land contract so she will have a basis in the property and you can spread out the gains....you can gift her payments each year as long as under the gift limitations. --66.117.xxx.xx