Legal Question in Real Estate Law in Massachusetts

My daughter and her husband would like to sell their fixer-upper and buy a larger home. We would like to help by buying into the first home and helping with the fixing, thereby sharing profits. This would give them some cash to buy the second home before selling the first. What's the best way to do this? First home is worth about 220,000 currently with 180,ooo owed. Second home about 300,000.


Asked on 8/04/14, 11:48 am

1 Answer from Attorneys

the answer is a bit more complex than one would think. If your daughter and son-in-law bought the home and it is their principal home, once the sell you an interest it may be deemed an investment and therefor any gain to them will be long term capital gain and they will lose the $250,000 exemption each as owners of the home.

If the property was bought to flip, then the issues are completely different. The issue is then the current mortgage lender considering the sale of part of the property a sale and requiring the mortgage be paid-off in full.

The easiest way is for you to lend some money to your daughter and son-in-law with the right to convert it into an ownership interest upon being notified of the sale or at the current short-term AFR rate which is 0.36% for a period of 3 years or less,

Or a Mortgage and Note with a similar interest rate and X% of the profits.

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Answered on 8/04/14, 12:13 pm


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