Buying Real Estate with my Fiancee and In-laws

Hey,

There are versions of this question on the Real Estate forums from time to time, but this one is an interesting one because you’re getting married to the other occupant of the house, the people paying the down payment won’t be residing there. This means that there are multiple dynamics at play here which you’ve identified in your post.

The question basically boils down to what’s “fair” from each party’s perspective?

Your In-Laws’ Perspective: In their mind (and I would agree) they are being generous towards you and their daughter. They are also experiencing an opportunity cost by providing the down payment (and at 50%, this is likely a few hundred thousand dollars at least) when they could have otherwise deployed that money elsewhere for a greater or more predictable return. In their minds, “fair” is what is the least risk to them, since they’re being extremely generous; any equity that you get complicates things.

They would likely agree that if you’re not contributing down payment, then you should have no ownership rights. From a cynical point of view (which may have no similarity to their actual mindset), they may see this as a point of leverage over you and their daughter, since they control the roof over both of your heads. I bring up the last point only because it’s certainly a thing that does happen in some families and is worth considering.

Your Partner’s Perspective: In her mind, this is likely a fair arrangement, since you two will be able to afford to live in a (possibly much) better home than if you were renting, and have the stability that comes from avoiding rent fluctuations or eviction if your landlord sells the home. It wasn’t explicitly stated in your post, but I’m guessing that she will be on title, which allows her to build some equity.
The downside for her is that her parents have leverage over her life because they own at least half of her home as I mentioned in the paragraph above.

Your Perspective: In your mind this has plenty of upside along with some questions and potential downsides. It sounds like you have considered the other parties’ perspectives but there are some ways that this could be unfair. Obviously the cost stability of having this roof over your head and not having to move if the landlord sells is a big deal. You free up money from your ongoing costs to get ahead in other parts of your life. I see that you’re a member of r/leanfire so that’s likely crossed your mind.

The very legitimate downside here is that you have neither equity in, nor control over, the roof over your head. In fact, in some ways this is worse than with a traditional landlord. Every one of us in a serious relationship or marriage accepts the influence of their in-laws in their life. Yours will be controlling your shelter and this is a huge point of leverage over you, your partner and your relationship. What happens if you want to explore a job in another city and your in-laws want you to stay close by (assuming they live nearby in this hypothetical) and want you two to stay close for future grandkids? What if you two decide that the home isn’t right for you and want to move, but your in-laws don’t agree? What if your in-laws want to move in with you as they get older? Yes, you can simply move out but where does that leave you? The other downside is that you’re not getting the chance to build equity at an age where it would benefit you a lot down the road.

Questions to ask before going forward: I want to acknowledge the great answer from u/cynicalsowhat. I think he’s got excellent experience and I usually agree with him. In this case, however, I think his stance is too black and white.

Who will bear ongoing repair costs for the home? Yes, your “rent” will be less than if you and your girlfriend bought on your own, but will you be expected to pay property taxes and key systems repairs, like a furnace or new roof? You wouldn’t do this as a “regular” tenant. Will you still be saving money if you do? Assuming that you are saving money each month overall, can you deploy those savings into an investment elsewhere? This would be one that is just yours in the event of a relationship breakdown. Part of making things “fair” is having the security of a financial exit strategy so that you’re not so financially beholden to your partner and in-laws. Is there any path to equity for you in this home? Although I wish you and your partner a lifetime of happiness together, it’s good to know where you stand if you aren’t together forever. Maybe this could be written into the purchase agreement (or another legal document) that you build equity over time that reflects your contribution to the home and time in the relationship. If you and your partner broke up a month from now, that might rightfully be nothing. If it was five years from now, though, maybe it would be fair to acknowledge your contributions in some way. Taken to the extreme, what about if you and your partner were married for 40 years and your in-laws had passed away? What if they were alive and your spouse died? Do you really still have no equity in your own home? Family law (which would cover divorce and separations) and Real Estate law are more complex than most people think, so you can’t assume that what would happen in the event of death or divorce would fit everyone’s definition of “fair.” As u/lih9 said, a big financial decision like this one has an impact on your life and relationship. At minimum, you need to be asking the questions to know where you stand and advocating for yourself where you need to. Your paths forward boil down to the four that he mentioned, and there’s no right or wrong, only the one that works for all three parties.

Good luck. Please update us all with how this goes as I think it’s a fascinating scenario and has the potential to educate others who may be dealing with similar questions.

Source: I’m a Realtor in Ottawa, Ontario. My team’s clients, especially first-time homebuyers, often purchase with help from family and these are the types of questions that we see a lot.