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Under Contract

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We are now officially under contract!!!

Not hubs & I (we still haven’t even started house-hunting, but plan to start in August!! Can’t wait!!!) – my dad’s Utah house!

After receiving a couple competing offers, we accepted one that we felt was more than fair (it’s actually over our listed asking-price). We’ve already completed inspection and all the requested repairs are super minor, so we’re paying a handyman to get it all fixed up.

At this point, the last hurdles are in regard to the buyer’s financing. Our realtor has been in contact with the lender and believes the loan will be funded without a problem. Given that the buying price is above the list price (and above the comparables our realtor pulled), we’re holding our breath and crossing our fingers that the appraisal comes in high enough to cover it. Fortunately, our realtor is a rock star and has made up a whole list of home improvements for the inspector and feels confident that the appraisal shouldn’t be a problem.

If all works out with buyer’s financing, we are set to close on August 15th! Super pumped!

Initially, we were thinking we wouldn’t make too much off the sale of this home. Remember, both my siblings were in favor of renting it instead of selling due to this reason.

But given our higher-than-expected sale price, we should stand to net nearly $100,000!!! Not too shabby!

The next question is what to do with the money.

My dad does have a decent-sized net worth but, to date, we’ve done next-to-nothing with his investments. Everything is still in the original investment accounts he selected and has not been touched. We want to be somewhat conservative because my dad is legally disabled and will never be able to work again (if interested, read more about his condition here). His physicians have said that his illness tends to have a life expectancy of 2-20 years. If he lives another 20 years, he could easily burn through all of his savings. He’s already in assisted living and his care is incredibly expensive. So we really need to be smart and manage his money wisely so that costs of his care don’t end up falling on the shoulders of my siblings and me.

I’m a fan of pretty boring investment strategies. Mutual funds and such. My brother has talked about perhaps investing in real estate back in the Austin area (which makes it less complicated and risky than an out-of-state rental). He’s even thrown out the idea of establishing an LLC for a rental property so my dad’s other assets are protected. Depending on cost, we could possibly pay for a rental with liquid cash without needing to withdraw from current investments (the alternative would be putting a large amount down and taking out a small mortgage).

I’m open to various ideas, but I’m also a fan of EASY. Taking over my dad’s affairs has been incredibly time-consuming and, frankly, none of us has time for it. Meeting with an investment advisor once or twice a year is infinitely easier than dealing with rentals and such. That being said, in the past year that we’ve been in charge of my dad’s finances, his investments really haven’t performed great. He’s averaged about a 4% rate of return. I’d like to see closer to an 8-10% return, if at all possible. At only a 4% rate of return, we’re eventually going to eat into his nest egg. Fortunately, he had enough cash in the bank that we haven’t touched any investments at this point but eventually the liquid money will dry up and we’ll have no other option but to raid his investments in order to pay for his care.

What do you all think? If you were charged with caring for a parent’s estate, what types of investments might you make? What are your thoughts of investing in mutual funds versus investing in real estate?

Another possibility is to still invest in IRAs. My dad technically has an “earned income” because he received a generous severance package from his previous employer before having to leave due to his health issues (it’s paid out monthly for another year still). So would it be better to actually fund a retirement account versus buying mutual funds? Or is it better to keep the money more liquid than in retirement or real estate? Something like mutual funds that are easier to sell and claim the cash?? My dad is 60, by the way. I’d value any and all input you may have!

Ashley

Texan at heart; Arizonan on paper. Lover of running, cheese, camping, and family (fur-family included!). Blogger, motivated to get out of debt YESTERDAY! Follow along with my journey!

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18 Comments

  • Reply Juhli |

    I’d be delighted with an average return of 4% in the current economy! I second keeping it simple as the economy will change – it is one thing you can count on.

  • Reply Sarah |

    I don’t have any advice, but my Dad (75 and in good health) called his financial adviser last week to ask about what to do with some money he has. His adviser told him there is nothing out there right now that is worth investing in – meaning bonds, stocks, mutual funds … that type of thing. Dad is now mulling real estate as that seems to be the only thing earning real money. All of that said, I’m on board with your “easy” thoughts. I wouldn’t want to be running a rental and a family (and a full-time job) either! Good luck!

  • Reply Jax |

    There is something to be said for an asset that continually brings money in. Ideally, if you decided to invest in a rental property, there would always be some money coming in and would limit how much you might have to take out of his investments. Property managers can handle everything for 8-11% of the monthly rents, and if they’re good then they are totally worth it. But, I can see the appeal of going the easier route. Would your brother be able to take the lead if you all went the rental route? If you would have to share major responsibility then that might not be worth it.

    Regarding IRAs-there is only a set amount he can contribute each year-$6,500. So maybe that can be part of your strategy to diversify?

    Good luck!

  • Reply Angie |

    With the market the past 2 years 4% is pretty good! Excluding the last month or two, my investments have stayed almost exactly flat since beginning of 2014.

  • Reply Jean |

    Congratulations on the sale! I know that will be a big weight off your shoulders/mind.

    It might be worth your time to talk to a trusted financial adviser and see what he/she would recommend. You want to make sure that your dad’s assets are protected for his future care, however long that may be.

  • Reply Kerry |

    I’m with you–conservative and easy is the way to go. Don’t let your brother fund his real estate empire dreams with dad’s money.

  • Reply Den |

    First goal – to have enough money for your dad to be taken care of as long as needed.

    Second goal – to NOT add to anyone’s stress or work levels taking care of your dad’s finances.

    Third goal – to keep a good relationship with your siblings in a difficult situation.

    So – with those three goals in mind I would say that buying real estate is not a good choice. It’s iffy on number one, bad on number two and really bad on number three…..

    I would suggest a financial advisor. There may be ways to protect your dad’s assets while keeping an annuity coming in to fund his care. Good luck!

  • Reply Tammy |

    I agree with the others- real estate is a bad idea. Not only is the capital tied up but you have to have renters that 1. pay the rent (on time) and 2. take care of the property. Not all renters do that. It also just seems like a lot of hassle and responsibility that’s just not necessary. I agree with the suggestion to see a financial adviser.

  • Reply A.J. Clark |

    You should be talking to an elder affairs attorney ASAP on how to protect your dad’s assets so that assisted living and (eventually) a nursing home. My grandfather’s house is being sold in the next few weeks, and all of the proceeds are being put in a trust for his benefit… I don’t know all of the details, but I know it’s better than being kept in a savings account.

    I also echo what everyone else has said: 4% in this market isn’t bad at all. It is next to impossible to get 8-10% returns in this market. If anything, given that you need some of the money in the next few years to pay for his care, I would consider putting more of it in even more conservative investments. If the stock market craters in the next year or two (don’t rule it out!), your dad’s nest egg could disappear by a large amount, and you would be left paying for his care.

    The idea of a rental property or two is appealing. It turns his cash that is tied up in investments into an income stream that can pay for his care (if there are no mortgages and it’s not levered). It would definitely be more work though. And if the monthly payments from rent aren’t enough, it would be risky to sell.

    Taxes also factor into this too… How much of his nest egg would be depleted by taxes when you sell the investments!? Talk to a financial advisor and a lawyer ASAP.

  • Reply SAK |

    Real estate is too illiquid – don’t do that. And 4% is great. The kind of risky investments you need for 8-10% these are not for anyone who can’t afford to lose the whole amount. This is a very low interest rate environment.

    Throw as much money in retirement accounts as you can (still have to invest it though).

    And find a fee only financial planner and show them everything, explain the needs and see what they say. Worth investing the money and time for that. But not someone who wants to manage the money or sell you something!

  • Reply Dimity |

    One can only contribute a certain amount into an IRA per year–if the IRS considers a severance package “income”. Also, if your Dad makes over a certain amount per year, only the Traditional IRA would be available, and that is pre-tax income which would be taxed upon withdrawal. While an IRA might sound tempting, it is probably not the right way to go with your Dad’s money.

  • Reply Christopher |

    4% is great. With your dads age, have you looked at an annuity? Also, you should talk to an accountant about his tax liability for 2016.

  • Reply Kathy |

    A Roth IRA is great; you can put the money in any fund you choose (I like the Vanguard suggestion above!) and withdraw any amount of the initial deposit without penalty.
    Earnings can be withdrawn but include fees and penalties. There are limits on the amount per Roth but opening several Roth accounts may be ok, depending on age or situation.
    Not a financial advisor; did this with small inheritance on advice of an advisor. Whose two visits cost $1200!

  • Reply C@thesingledollar |

    You need this investment to be simple and low-stress. Real estate is NOT THAT. Index funds, perhaps in a trust, are the way to go, almost certainly, but I second the recommendation to talk to at least two elder care attorneys/advisors about the best way to structure it legally.

    You also need to be realistic about returns. 4% is perfectly good right now. Over the course of the rest of your dad’s life, the return on basic index funds will vary year to year, but it will almost certainly do better overall than anything else you could choose, and at .0001% of the stress.

    Do not let your brother win on this real estate thing because it will end up taking over all your lives and create constant conflict/work for all the siblings, which you do not need. If your brother is so on-fire to invest in real estate, he can do it with his own money and do all the work for it.

  • Reply C@thesingledollar |

    Also, if he’s 60, he should start claiming Social Security right now, if he hasn’t already. Yes, if he waits the payout could technically be higher per month. But with a 2-20 year projected lifespan, I’d say better to start now and use the money on his current care.

So, what do you think ?