View Full Version : Two Roads Diverged in a Yellow Wood (or in a NJ neighborhood)
catherine
1-13-16, 12:02pm
Arghh....
So I have the opportunity to explore two options regarding my home/personal debt situation
Most of you know my situation:
Heavily in debt due to recession/family related issues: most of the debt is in taxes, rest is small potatoes.
Still owe more than 200k on my mortgage.
Have had a $700 income/month opportunity loss every month bc BIL is living in the house next door (half-owned by DH) and we haven't made him pay rent, since he has a menial job
I've considered selling our home and downsizing, but haven't due to DH's strong desire to stay put and my own emotional attachment, although I could be easily swayed to move to VT if it were totally up to me.
So I've been in a state of limbo, unable to move forward emotionally/practically given DH/BIL's happiness where they are: HOWEVER, some events have conspired that have shaken things up a bit.
Brother-in-law definitely wants to move--he wants NO interest in the house at all. He's broke, bleeding financially, and wants to cash out, pay off his credit cards, replace his 15 year old car and get an apartment.
Our son is looking for a place desperately. He and his wife and GS are living in a 2 bedroom house with his MIL. They don't have enough money for a down payment on their own house yet, but DS's job prospects are good and DIL is looking for a job.
DH REALLY wants to keep the house in the family--he feels it's his ONLY tangible legacy, and he thinks that if we cash out, the money will be gone and he will have contributed nothing (he doesn't understand that if the money goes toward our IRS debt that that saves us several hundred a month in interest as well as many grey hairs on my head, however..)
So here are the two options:
1. Just sell the house
Use the proceeds to pay off debt and then go full steam ahead on paying off the mortgage.
2. Buy out BIL
Cash out the house that's paid for. Pay BIL half. Pay all tax liabilities, in which case I'll be debt-free in one way, but I'll have TWO mortgages to worry about instead of one. However, here are the advantages of that plan:
Wipe the tax slate clean
Cleanly "sell" the house with no real estate fees and no trouble having to list it etc.
Gives us an income-producing asset, although the rent would probably just about cover principle, interest, taxes, repairs, and would probably cost us a bit some months.
For the short term, my DS and DIL/GS can live there and pay us rent.
There may be tax advantages, but I don't know enough about real estate to know for sure
It fulfills the legacy bucket list item that DH would like to check off (provided my own consultancy continues to prosper)
As you know, I don't have a very large "security gland" as Dave Ramsey puts it. So Option #2 is all dependent on how MUCH more risk can I tolerate, and it's also dependent on whether or not I could get a mortgage.
What say you, wise people?
Well, before I decided, I would apply for the mortgage. If you don't get it, your choice pretty much has been made.
I also would check into the tax situation on renting out. Here in Minnesota, you can homestead your primary residence. Investment properties don't get that treatment, so taxes on that property could go up significantly. There appear to be some exceptions based on who you rent to (immediate family gets a break or two). If you have a tax accountant (or know one) you probably could get an idea of how much the taxes would go up (if at all).
I also would think about a little margin. What happens if DS/DiL choose not to live there for whatever reason? Would you rent the house to "strangers"? What are the financial implications of renting outside the family and then having the rent not paid for a few months (renter out of work, renter vanishes into the night, house is uninhabitable due to an insurable incident)? What if the house needs a major fix (new furnace, new roof, etc.)? Can you carry it? Or is that cutting it too close with other expenses and debt?
Simple but very blunt question - when will you let your family live with the consequences and choices in their lives without rescuing them? As I type this I feel I sound cruel but at some point, you have to let go and stop pleasing others over your own well-being, financially, mentally, emotionally and physically.
If you were suddenly unable to work, what would be your options? Decision? Ask your DH what would happen then? What would he decide then? Would his legacy pay the debts?
Option 1.
iris lilies
1-13-16, 1:33pm
Just sell the house.
iris lilies
1-13-16, 1:40pm
I can't read too deeply into your options because emotional phrases like "son looking for a place desperately" and " DH..feels...legacy" just scare me. These are not rational thoughts that should be considered in a hair-on-fire situation.
Now, I will certainly admit that our relationship with money can be an emotional one. I know plenty of Mr.Money Mustache folks who think those of us who pay off our mortgage rather than investing that money are fools. So be it, we all make our foolish, emotional financial choices.
But here is an opportunity to get out. So, get out.
Ultralight
1-13-16, 1:43pm
I have no advice for the OP. Not my forte.
But I will say I feel for you. You're in a bind -- a major one too.
Hang in there!
I can't read too deeply into your options because emotional phrases like "son looking for a place desperately" and " DH..feels...legacy" just scare me. These are not rational thoughts that should be considered in a hair-on-fire situation.
Now, I will certainly admit that our relationship with money can be an emotional one. I know plenty of Mr.Money Mustache folks who think those of us who pay off our mortgage rather than investing that money are fools. So be it, we all make our foolish, emotional financial choices.
But here is an opportunity to get out. So, get out.
+1
Ultralight
1-13-16, 2:04pm
I mean this: If I were in your shoes I'd take Iris Lillies' and bae's advice.
Maybe there are other options out there, but on this thread that is the advice I would take. I suspect they are pretty dang sharp about these types of issues.
You guys are awesome. Razz, I don't think you're being cruel--one of the reasons I'm a Dave Ramsey devotee and not a Suze Orman one is I'd rather have the guy calling me stupid than the woman calling me "girlfriend." (BTW, DR would NEVER sanction taking out another mortgage). I appreciate the gentle reality slaps upside my head, I really do. I know I need them.
I hear ya, IL/bae, and thanks for the support, UA. (I'm good at hanging in there--in fact, most of the time, that's my problem)
I would also side with bae and iris. Beyond what they've already mentioned the thing that leapt out at me is that DS and his family are living with MIL and don't have money for a down payment. There's a much larger continuum of types of housing beyond living in one's MIL's spare bedroom and buying a house. For a young family, (or even an older one) renting is a perfectly acceptable option. Can they not afford to do this? If not then how is getting them in the second house better than having BIL in it? And if they can, then they can also afford to rent from someone else. So IMHO you should sell the house and let DS and his wife be adults that take care of their own issues, including finding a place to live that isn't MIL's spare bedroom.
I agree with what has already been said, but I wonder, is the decision entirely up to you?
Are you willing to take a stand with those around you who are not making decisions that benefit you? I really am speaking of your DH in particular since most of us married folks are teams, but even the best team can disagree on strategy.
Teacher Terry
1-13-16, 2:56pm
Selling appears to be your best option. We had a few rentals that barely covered the bills so when things went wrong and they did we were losing $ every month. Eventually we sold & lost more $. This appears to be the opportunity to right your financial ship. You may find a day where you can't work, etc and you need to be prepared. It is hard when you disagree with your hubby but sometimes you just have to take a stand. This stuff is not fun. Hugs:))
Williamsmith
1-13-16, 3:03pm
I can't tell you what's best for you. I can tell you what I would do if I woke up one day and found myself in your financial situation. I'd figure out the best plan to get out of debt and put it into action. Debt that I can't pay with assets is bad debt. IRS debt is worse than bad debt. I would sell the house and pay off debt. It's pretty obvious. There's nothing wrong with helping needy people out, but not at your own expense. But this is not a financial problem.....it's a relationship and a communication problem.
rodeosweetheart
1-13-16, 4:05pm
Arghh....
So I have the opportunity to explore two options regarding my home/personal debt situation
Most of you know my situation:
Heavily in debt due to recession/family related issues: most of the debt is in taxes, rest is small potatoes.
Still owe more than 200k on my mortgage.
Have had a $700 income/month opportunity loss every month bc BIL is living in the house next door (half-owned by DH) and we haven't made him pay rent, since he has a menial job
I've considered selling our home and downsizing, but haven't due to DH's strong desire to stay put and my own emotional attachment, although I could be easily swayed to move to VT if it were totally up to me.
So I've been in a state of limbo, unable to move forward emotionally/practically given DH/BIL's happiness where they are: HOWEVER, some events have conspired that have shaken things up a bit.
Brother-in-law definitely wants to move--he wants NO interest in the house at all. He's broke, bleeding financially, and wants to cash out, pay off his credit cards, replace his 15 year old car and get an apartment.
Our son is looking for a place desperately. He and his wife and GS are living in a 2 bedroom house with his MIL. They don't have enough money for a down payment on their own house yet, but DS's job prospects are good and DIL is looking for a job.
DH REALLY wants to keep the house in the family--he feels it's his ONLY tangible legacy, and he thinks that if we cash out, the money will be gone and he will have contributed nothing (he doesn't understand that if the money goes toward our IRS debt that that saves us several hundred a month in interest as well as many grey hairs on my head, however..)
So here are the two options:
1. Just sell the house
Use the proceeds to pay off debt and then go full steam ahead on paying off the mortgage.
2. Buy out BIL
Cash out the house that's paid for. Pay BIL half. Pay all tax liabilities, in which case I'll be debt-free in one way, but I'll have TWO mortgages to worry about instead of one. However, here are the advantages of that plan:
Wipe the tax slate clean
Cleanly "sell" the house with no real estate fees and no trouble having to list it etc.
Gives us an income-producing asset, although the rent would probably just about cover principle, interest, taxes, repairs, and would probably cost us a bit some months.
For the short term, my DS and DIL/GS can live there and pay us rent.
There may be tax advantages, but I don't know enough about real estate to know for sure
It fulfills the legacy bucket list item that DH would like to check off (provided my own consultancy continues to prosper)
As you know, I don't have a very large "security gland" as Dave Ramsey puts it. So Option #2 is all dependent on how MUCH more risk can I tolerate, and it's also dependent on whether or not I could get a mortgage.
What say you, wise people?
I am not quite following what the options are--when you say, sell the house, do you mean the one that BIL is living in and wants out of?
But if that is what you mean, then I would definitely sell that house and split the proceeds. You can't buy out BIL when you owe debt to the IRS, as you aren't in a position to do so. Same as giving the son a place to live, unless he wants to come live with you guys and pay some rent, but it sounds like he would get the MIL house to live in?
I don't think think that works because you have to get out of debt with IRS.
Personally, I'd go scorched earth and sell both house with mortgage on it and the MIL house, split proceeds of MIL house with BIL so he can get out of there and retire his debt. I'd use proceeds to retired IRS debt and any other debt and then find a house I liked in Vermont, where taxes are much better. You guys have family ties and memories in Vermont, so that would help satisfy that angle of the equation.
I would write this one into the Dave Ramsey show, too, because he's good at parsing this kind of complicated family dynamic. I don;t think he would recommend keeping the house that husband owns with BIL because he's against renting properties if your own financial house is less than super secure. He likes to get folks completely out of debt, and he totally wants them out of debt with IRS immediately.
Even if you just sell BIL house and use that money to retire IRS debt, it would be incredibly positive, I would think. Do you guys have the 3-6 months cash to live on, for example? And if you acquire another house then THAT house needs its own emergency fund, so I would personally be totally against taking on any more responsibility for others as I wouldl want to get myself out of debt first.
I totally get wanting to help the kids and I just did help two of mine but if I owed money to IRS, I would not have given them anything--I would love to see you out of that debt and all debt/ I figure from now on, the kids can bail me out--I'm done.
I'm scared you've got way too much burden on you already--no more!
I second Rodeo's idea. Time for a fresh start. It's your life too. You have had this situation for quite a while as I recall, it hasn't gotten better and you haven't gotten younger, time to take care of you.
...
I hear ya, IL/bae, and thanks for the support, UA. (I'm good at hanging in there--in fact, most of the time, that's my problem)
Same here; "endurance" should be my middle name. Jane, treading mud.
As far as your husband wanting to keep the house in the family--that's probably not going to happen anyway. People change their minds and move on. Considering how you describe your financial situation, I line up with the people counseling you to sell. But--as always--go with your instincts.
Ultralight
1-13-16, 5:55pm
As far as your husband wanting to keep the house in the family--that's probably not going to happen anyway. People change their minds and move on.
This right here is a really good point. It applies to so many family heirlooms.
For my mom and dad -- my mom especially -- everything is a family heirloom!
"Don't throw that bag away! It had a box with your grandma's shoes in it once!" -- My mom.
Sell the house, and deduct from BIL's half back rent. It's ridiculous that he lived there for free all this time.
IshbelRobertson
1-13-16, 6:11pm
I don't know about US taxation or laws re selling property, but I'm inclined to go with the views of IL and bae. Debt at our time of life would scare the bejasus out of me.
Ultralight
1-13-16, 6:15pm
Sell the house, and deduct from BIL's half back rent. It's ridiculous that he lived there for free all this time.
I pay $400 a month plus utilities and misc. free labor!
Thanks again for your support, all. OK, done--I'm definitely getting a big mortgage on the house next door, and THEN I'll invite all the homeless people to live there, and I'll quit my job and cook them meals! (jk)
No, seriously, I think the consensus is clear, and I just had something pop up on my FB feed that seemed very appropriate to this topic.
It said:
"A wise woman once said f**k this s**t and she lived happily ever after."
I think I'm after that kind of wisdom!
rodeosweetheart
1-13-16, 7:07pm
Yay, Catherine!
Teacher Terry
1-13-16, 8:08pm
I started to laugh so hard when I read your post!! Awesome and a tough decision. When you get older you really do have to look out for your financial future self.
As far as your husband wanting to keep the house in the family--that's probably not going to happen anyway. People change their minds and move on. Considering how you describe your financial situation, I line up with the people counseling you to sell. But--as always--go with your instincts.
The desire to leave a legacy reminds me of an uncle, by marriage, of mine. He had inherited some stock from his father. My dad, being an active investor, kept an eye on that stock for years and years. A couple decades after uncle's father had passed away the stock exploded in value because the company was about to be bought out. After years of the stock price basically keeping pace with inflation. Dad suggested that it was the perfect time to sell. Uncle's response was "yeah, but it's the one thing I still have of daddy's..." He didn't sell and the price crashed back down to where it had been because the company sale fell through. The best legacy is not some expensive asset that will be treated as a family heirloom, it's cold hard cash that can be used for whatever needs the inheritor may have at some future time.
Ultralight
1-13-16, 9:56pm
The desire to leave a legacy reminds me of an uncle, by marriage, of mine. He had inherited some stock from his father. My dad, being an active investor, kept an eye on that stock for years and years. A couple decades after uncle's father had passed away the stock exploded in value because the company was about to be bought out. After years of the stock price basically keeping pace with inflation. Dad suggested that it was the perfect time to sell. Uncle's response was "yeah, but it's the one thing I still have of daddy's..." He didn't sell and the price crashed back down to where it had been because the company sale fell through. The best legacy is not some expensive asset that will be treated as a family heirloom, it's cold hard cash that can be used for whatever needs the inheritor may have at some future time.
Good story; good moral!
I don't really understand the legacy thing. But I suppose it is important to some folks.
Williamsmith
1-13-16, 11:27pm
I get legacy and sentimental value confused. They seem to be of the same family. I have several handguns that I carried during various times in my career. When the state changed issued weapons, I would buy the old one. Well, I once promised to gift to each of my three children one of my handguns I carried. That's part of my legacy but is also sentimental to me. So one of them gets a Ruger Security Six .357 magnum revolver, one a Baretta Model 92 .40 caliber semiauto and one a Glock .45GAP.
I would rather just sell them and use the money for other investments but the blowback on that would be immense. I can understand the hesitation to selling the house. It's a legacy and sentimental. Nothing common sense about it.
ToomuchStuff
1-14-16, 1:10am
I am also in the sell the house category. It certainly is questionable if you could get a mortgage to buy out you BIL, and the IRS could possibly force the issue the other way and expect him to buy you out and seize it. Is the house worth more then is owed? (that could throw more wrenches into things)
Your son would probably love to live there. It doesn't mean he can afford it (you haven't really gone into specs there), or that he would realize that it was a BUSINESS ARRANGEMENT (don't be late on paying, don't expect deals, etc), because you can't afford for it not to be.
If the IRS can sell something, cover their costs of selling and any debt owed on it, and come out with $10 towards your debt, they will.
Williamsmith
1-14-16, 3:58am
IRS......this right here is the variable I find most compelling in this scenario. My efforts would be really to focus on eliminating the debt that is owed them. I prefer they don't know I exist. I just can't relate on that level. Something is wrong with my financial existence of I owe something tax wise to them. I just would want that to go away immediately and any friend or family relationship that exacerbates that and or negatively affects it would have to take a back seat to rectifying the debt. But that is just me.
I fully expect that there is no way I would qualify for a mortgage unless the IRS was paid in full at the house closing. I know that's doable. So my thinking was basically to "rob Peter to pay Paul"--turn an IRS debt into a lower-interest, less scary mortgage debt. But a mortgage debt is still scary.
Williamsmith, I do want that debt to go away immediately. I'm on a payment plan with them, and I'm religious about paying it, and I pay more whenever I can. And it sickens me to see the penalties and interest on the statements that come in, and I think about it when I go to bed at night and when I get up in the morning. It sickens me that I make the money I do and I don't feel I can afford a new mattress to replace the lumpy, back-breaking one I've got. It sickens me that I make the money I do and I don't always have the money to put into my Roth each year. It sickens me that I'm the age that I am, have lived right, worked like a dog, and I have almost nothing in that Roth. It's the noose around my neck, but I've learned to live with it and accept that unless a windfall came, I'm stuck with it for about 5 years. Well, my BIL moving out is my windfall.
Williamsmith
1-14-16, 7:31am
Believe me I am so sorry for your troubles. I unexpectedly lost two very large tax deductions last year. Daughter moved out abruptly....that was my fault and I lost a rental deduction with depreciation. That was my brothers fault. So when the taxes were done by my accountant I got the email that broke the news. I owed....big time. I had savings to cover it but I could see how it can happen. I'm not suggesting you aren't taking it seriously. Maybe, I'm sort of throwing it out there that being as financially vulnerable as it seems you are, others are taking away from your resources to satisfy the debt and allow you to get that bed you so richly deserve. Leave it up to you to decide if that is valid or not. Anyway....you will eventually overcome because you have a plan and you are determined.
Ultralight
1-14-16, 7:31am
...you will eventually overcome because you have a plan and you are determined.
+1
Maybe, I'm sort of throwing it out there that being as financially vulnerable as it seems you are, others are taking away from your resources to satisfy the debt and allow you to get that bed you so richly deserve. Leave it up to you to decide if that is valid or not. Anyway....you will eventually overcome because you have a plan and you are determined.
I hear ya. Yes, I know I'll overcome. I'll get to that mountaintop and be able to say "free at last"!
Powered by vBulletin® Version 4.2.5 Copyright © 2025 vBulletin Solutions Inc. All rights reserved.