Buying your adult kid a house or helping them buy one

[CountingDown]

@thumper1, we were lucky that the previous owners were retiring to Florida and was happy to leave us the appliances and some furniture. It enabled us to buy those items once we replenished our savings and we didn’t have to do it all at once.

We were also able to finance with 10% down, 10% HELOC, and 80% mortgage, so we avoided PMI. Can’t do that any longer.

No way we were buying in our 20s, anyway. H and I were married very young, he worked several years, and then went to law school. We didn’t know where he’d go to school or where we’d land afterwards. I was supporting us during those three years so he didn’t have to take out more loans than necessary. Kids were born shortly thereafter.

[natty1988]

@blossom

This is a truism which gets great support by mortgage brokers, real estate agents, title insurers, and sadly- policy-makers. But from a financial perspective, it is NOT always true, and it behooves folks to actually do their own math to determine if it’s true in their situation.

I lived in a small midwestern city and was in the process of selling my house (job relocation) when one of the big 3 automakers announced they were closing the plant which sat about 5 miles outside city limits.

Property values plunged by about 20% overnight. Nothing you can do about it- no amount of staging or paint or carpeting or landscaping can change the essential dynamic of an entire neighborhood-- and about 50 similar houses hitting the market the same week.

So sure- buy low and sell high. Great advice. Except for the folks who need to sell when the market does a nose dive (financial crisis of 2008? recession in 2001?) in which case renting-- especially if someone is only living in a place for 5-6 years-- is usually the more rational choice economically. Stick your down payment money in an index fund…

And I won’t even get into the issues caused when a young couple divorces… financially, they almost always would have been better off renting. Lease is up- they move on. But the house (sometimes referred to as the “marital mausoleum”) causes a whole lotta pain- emotional, financial, tax/cash flow, etc.

But the real estate industry likes to deal in tropes- handsome husband, pretty wife, two photogenic children- staring from the sidewalk at a 4 bedroom center hall colonial. Of COURSE it’s better to own than rent!!!

Oh absolutely! I don’t think owning is the be all and end all. And I do think we really emphasize homeownership too much. I’ve known people who’ve gotten into trouble by over extending themselves…it wasn’t pretty!

@blossom

I know a lot of people who believe that the tax breaks make ownership better than renting. They have never actually done the calculation (and since they don’t prepare their own taxes, they don’t understand that in some cases, depending on SALT, they are clearly WORSE off owning) but believe what they hear. Mostly from the real estate industry!!!

I’ve got friends who are retired, underwater on their mortgage, and still believe that owning is financially better than renting. The notion that your adult kids will need to bail you out if/when you need to move into assisted living- yikes!

I’ve known people who think that too! It’s really a shame. I think some people are so intent on owning that they just jump in without doing research. Or their older relatives tell them that you HAVE to own property and they just give advice without realizing how much has changed since they bought their homes…

@abasket

I’m going to add that NEVER did I ever think buying our first house was anyone’s responsibility to afford but ours. There was never any expectation for either set of parents to hand us some cash. Help us move in, do a repair or something - sure.

As for our kids, again I don’t think they would ever think that we would- let alone if we could - help them secure a home through a significant gift of cash. Buy them a nice house warming gift? Sure. And help move in, do a repair, etc. Yep. But especially if they are a couple, home ownership is part of living within your means, pride in saving and affording it, etc.

I guess it’s really a perk if you can do more than that. But I sometimes think that this is an extension of parents feeling like they have to provide so much, make things easier, get things in place faster, etc. for our kids. Please don’t take offense to that! In SOME cases, this feels like coddling for possessions - one of the things parents in our generation have been accused of doing for the past 20-30 years!

Good point! I’ve worked with people who couldn’t retire until they were in their late 80’s because they helped their kids with buying houses, weddings, etc. These people weren’t poor, but they weren’t fabulously wealthy either…that said, people are free to do what they want.

[FallGirl]

I just want to add, helping an adult child buy a house is not a new thing. My parents had a house built the year I was born (I was #3 and we were living in a small apartment), but my Dad’s mom and stepdad paid most or all of it. I knew plenty of people in my generation who had a lot of help from parents in buying homes.

We are fortunate to be able to help our kids this way without sacrificing a nice retirement. Our kids did not feel entitled to this help, but they are very thankful that it is available to them.

[deb922]

I have to believe that part of this is your experience and your parent’s experience.

For instance going and paying for college. My mom did not go to college and her parents had a grade school education. Her father didn’t believe in women going to college. But she has a friend with a PhD, I would say that her friends parents believed in college and maybe her parents went to college. And so it goes.

If my or my husband’s parents help us purchase a home, then we would feel that we should “pay it forward”. If we saved and bought a house on our own, then we might feel the same for our children.

Also if your parents helped you purchase a home or gave you substantial gift of money, then you would (probably) be in a better financial position to help your children as you would have had less stress to save for house down payments, college and retirement.

I think it’s such an individual decision. Of course there are those who are self made and have more than enough for retirement, your needs and are able to also give.

But in our situation, we are nervous about our retirement, we gifted the kids a college education debt free. We’ve never had our parents able to gift us money, and so we don’t have the funds to help.

[SOSConcern]

My friend’s son lives in Boston HCOL area, rent is $5K/month, 2 BR. He rented with another fellow for a while, but now is married. They are looking to purchase a condo soon, because they believe they can move forward financially with buying - and have the cash stream to qualify with what they want to purchase.

DD2 needs to have a bit more ‘financial maturity’ - and she recognizes that (she has too high spending in entertainment/travel/clothes/shoes). She has two ST goals (one is an athletic event, and the other is a professional exam that she needs to prepare a good bit for it). She knows her funds coming in and specific budget items right off the top of her head, and has been making moves to save more. One action was pulling money from paycheck and directing it into her savings fund.

A parent often needs to discern between ‘help’, ‘enabling’, and ‘being taken advantage of’.

[SOSConcern]

I agree with you on being irritated that he didn’t just get some ST help and adjust/pay mother back - but a mother (or father) sometimes will do more for their adult offspring than what is really good for all involved. I can relate with DH’s brother who had a decent income (but was careless with his money until he married a very budget-minded woman) but immediately asked his financially challenged parents for ‘help’ when a deer caused his vehicle to be ‘totaled’ and he asked for help. We had just given parents some money to have a ceiling put in their basement main room - another brother was doing to work. Mother immediately redirected the money, which of course made DH’s brother mad - because oldest brother could stand on his own to get his vehicle replaced.

[Leigh22]

This makes sense. In my circles, I don’t know one person who received financial help from parents to buy a home, let alone one being purchased. It just doesn’t happen. Such a thing would never cross the minds of my kids, just like it never crossed mine.
We do save with a 529 and the oldest just graduated with a small loan and the other we should be able to cover without any debt on his part.
We do have one set of friends who are upper middle class and have two kids who didn’t go to college. I could see them maybe helping out with a home purchase.

[thumper1]

@Leigh22

In my circles, I don’t know one person who received financial help from parents to buy a home, let alone one being purchased. It

Honestly…I would never know as this is not something discussed in our circle of friends.

[showmom858]

None of our friends have ever said if they helped their kids with homes. It’s not somenthing we have discussed.

I did have a friend that died in 2020 and when her H sold the house here in San Diego he gave each of his sons $150K to use towards buying homes. His older S lives in Iowa so used the money to buy a place there. Younger S is in San Diego so has not yet invested in a home.

[seal16]

Same. We didn’t feel the need to share this information with anyone. We don’t share financial information outside our family

[Leigh22]

True, but I’m basing it on the fact that they openly discuss how they don’t pay for college tuition. Their kids take the max loans they can and then the parents will assist with getting loans, but the kids are 100% responsible for paying them. None of our friends kids even own homes - all live at home or rent.

[1Rubin]

Smart. How old is your D?

[cquin85]

@Htas

This is judgement too. That gifting when alive is preferred to gifting upon death. Just want to highlight as you called out Coolguy. I’m glad OP said no judgement and think it makes the conversation stronger. But you do need to check regardless of where you stand. (BTW, I have an opinion regarding why I won’t gift but withheld per OP request).

Technically, you’re right, it is. I’m not sure how OP could pose the question he/she posed and ask for no judgment. The whole thing is judgement, unless of course the OP was merely fishing for free legal and tax advice. Otherwise, it’s going to be, “We did X because Y,” where Y is judgement or subjective value or preference.

I’ve always subscribed to the notion that I made this money to make myself and my family secure AND happy. Helping my kids makes me happy.

As for the , “make them work and be frugal when they’re kids and withhold this and withhold that,” crowd, congratulations. Two of my kids make a lot of money and started saving for retirement right out of the gate. A third is in a pre-grad school job not making a lot of money but also saving for retirement, however so humbly. None of them had jobs in HS and barely had chores around the house. I know, we’re lax parents, whatever. They were frickin’ busy kids. They are all doing well, work hard and make sane and rational decisions and have respect for the $. They grew up watching me and maybe that’s why they’re not lost souls: I modeled it. Or maybe I’m just lucky.

There’s a lot of humility involved in raising other human beings. It’s a tough job and not one for the faint of heart. There is a lot of figuring it out along the way, trial and error, worry, second-guessing, dealing with external opinions, and sometimes just basically winging it best we can, because we’re raising individual human beings, not little automatons waiting for us to program. The people I listen to the least, and roll my eyes about the most, on this topic are those who proudly assert their rigid philosophy about how to do it. As for me, I was never that confident about it and had my fingers crossed a good amount of the time

[deb922]

@1Rubin

Smart. How old is your D?

This is about the prenup my daughter is adamant that she will have.

She’s 33, her fiancé is 34. They own a home, he has education debt, she doesn’t. She has a good start on her 401k.

They both have good jobs now, he makes more, they both want children.

I don’t think either are doing this with a plan to split but to to keep their assets. Daughter is very pragmatic and neither are what I would call spendthrifts.

[abasket]

Definitely not one way to make these decisions. I think that IS the point of many here - that circumstances and history and good fortune and not so good fortune, and relationships and all kinds of things come into play.

But the one common denominator that must be in place for a parent(s) to even entertain the thought of gifting house $$ is simply that - money. A chunk of money (chunk is relative! To some $2000 is a chunk! To others $20K!).

Money speaks and often speaks most loudly on CC —but many posting they don’t or can’t help MAY BE because there isn’t $$$ to entertain the thought. And so those people don’t often join in the conversation and say, “no way, we’re hard up for cash as it is!”

(Partial answer to @cquin85 , partially just a general response!)

[cquin85]

@abasket

But the one common denominator that must be in place for a parent(s) to even entertain the thought of gifting house $$ is simply that - money.

Very true.

[blossom]

My parents didn’t help me buy a house, didn’t help me pay off my grad school loans, didn’t do a bunch of things that other people have mentioned.

BUT- they had significant medical needs in their later years and although they needed a ton of practical support, care and emotional help, they did not need a penny from their kids (which is not something that a lot of my friends can say. Yeah, parents gifted them a down payment, and then needed $80K per year for a bunch of years for assisted living.)

BUT- they raised all their kids to be self-supporting, and to find a way to make a good, ethical life at whatever income level their choices yielded. So no siblings who needed bailing out after gambling debts, no sibling needing money for a lawyer after the third DUI, etc (again, not something my friends can say.)

So to the folks here who can’t buy their kid a house (and wish they can), there are other things you are likely already doing for your kids which is likely worth more in the long run. I thank my long-gone parents every day for showing me how to live a good life even if you can’t afford to “go first class”, how to make interesting friends, how to give back to the community even if you aren’t the person writing 7 figure checks to worthy causes.

When I was cleaning out my dad’s desk after he died, it was moving and heartbreaking to find the spiral notebook he maintained of his savings and investments. On a “not so huge” salary, they were aggressive savers (percentage wise), he researched every stock he bought, he documented every investment and tracked his “net worth” meticulously. It was humbling in many ways… even with a bunch of kids (and we were probably greedy brats at one time or another) they lived prudently, had no trouble saying no to something we could not afford, and gave us a life where we didn’t feel deprived in any way even if we weren’t living large.

And funded their own retirement, even with huge medical and nursing bills at the end.

So you folks who aren’t buying houses-- kudos to you. You might be giving your kids something even more valuable.

[1Rubin]

In my humble opinion, it isn’t a disservice to children to buy or not buy them a home. If you have money, why not? If you don’t have it, that’s fine.

Its not a duty, just a possibility. Nobody should expect getting one or feel bad about not giving one. As adults, they are free to work and buy whatever they want.

[itsgettingreal21]

Parents can both gift a house down payment and instill the intangibles you mention. It’s not either/or.

The judgment in many of the posts seem like class resentment.

[cquin85]

@kjofkw

Future SIL owns a very small condo in a popular Seattle neighborhood. Purchased about 5-6 years ago, for fear Seattle was going the same direction as San Fran regarding housing costs, and tech. It has not appreciated at all during that time. I think several factors played a role. His generation is starting to have children, so wanted more space. Covid, and the lack of a small courtyard or even balcony, and desire for home office space definitely hurt. Older building with character, but starting to have more problems (can say the same about myself ) , HOA’s increasing. Potential tech lay-offs.

That is almost assuredly incorrect, and significantly so. Flop houses in White Center, Rainier Valley and the CD have increased in value substantially over the last 5 to 6 years.

Tech layoffs have only recently begun here, so that along with rate hikes has probably knocked a off some value (again very recently), but not 6 years of market appreciation. That is very unlikely in Seattle, especially for a condo in what you describe as a very popular area. Up until now, tech in Seattle has been on absolute fire and those people have driven up prices to absurd levels in an area that has been rapidly increasing in cost since the late 1980s, with a brief flattening during the recession.

Whatever Seattle’s problems may be, nobody here has regretted investing in real estate over the last decade. My home purchases have outperformed all but a few of my investments.