Managing Parents Real Estate Portfolio

Managing Parents Real Estate Portfolio. The right answer starts with a deep conversation with parents about what they need.

By Ilyce Glink and Samuel J. Tamkin

Q: My dad, 89, owns three properties: a rural farm house on 50 acres worth $450,000 that he uses as a second home, a semi-rural house on 11 acres worth around $375,000 that is rented at $1800 per month, and an urban home on a one-third of an acre in Washington, D.C. worth around $1,000,000 that he uses as his primary residence. 

The rental home generates enough cash to pay the real estate taxes on the farm and he has a reverse mortgage on his D.C. home of about $500,000. His D.C. home could be rented out as it has a basement apartment and a 3-bedroom separate residence. He could probably get $4,500 per month on his D.C. home in rent. It would be tough to rent the rural home, but it’s a great weekend rental near Virginia wine country.  

He has five kids and our mom is no longer around. Two of us are close to retirement and could manage his rentals. Dad’s health is very good, but he is anxious to get the reverse mortgage behind him. Fortunately, he does not want to sell. Any thoughts or recommendations on how to manage his real estate going forward? 

Managing Parents Real Estate Portfolio

A: We’re not sure what your questions are. Your dad is in good health and doesn’t want to sell the properties. We don’t know how he uses these properties. Where does he live full or part-time or whether he needs cash to live on. 

That said, you estimate that your father’s real estate portfolio is worth around $1.8 million and is bringing in $21,600 per year. You also estimated he could rent his D.C. property for $4,500 per month, or $54,000 per year. That would pay his taxes and give him cash to live on, assuming he needs it, but may run afoul of his reverse mortgage requirement that he lives in the property full-time (unless you assume he’ll live in one of the units and rent the other). 

You are willing to handle the affairs of renting these properties for him. But you’d need to know whether he wants to rent them or use them. Our first recommendation is to find out what your dad wants to do, where he wants to live, and whether he needs income from these properties to make ends meet.

Managing Parents Rental Properties

If we put those issues aside, you seem to have a handle on the home that is currently rented. The DC home could be rented and you could handle interviewing tenants and handling that rental as well. You could even rent the basement apartment of the DC home as well.

You’ve already stated that the farm home would be a difficult rental but might make a good short term or weekend rental on the websites that host weekend or short term rentals. You can try going that route and seeing if there is enough money to be made that way and whether the time it takes to handle that rental is worth the money you get from the short term rentals. As you’d rent the farm home furnished, you’d certainly want to make sure that any family treasures are not left in the home that could be lost or damaged.

Talk to Parents About Their Real Estate Needs

So, if you rent all of these homes and your dad is getting good income from the rentals, where will your father call home? 

If you can’t rent the D.C. property without causing an issue with the reverse mortgage, investigate selling the property. Finally, paying off the reverse mortgage and investing the net proceeds.

Again, the right answer starts with a deep conversation with your dad. Find out about what he needs in the way of cash and help as he enters his 90s. We hope he stays healthy for a long time to come.

©2021 by Ilyce Glink and Samuel J. Tamkin.