If you’ve just begun helping an older relative or having conversations about the future, you may have found out that your loved one owns rental property. You may also be considering investing in rental property now to pay for a family member’s care later.
Rental property can be a great asset down the road when it comes time to long term care. However, it doesn’t come without its challenges.
In this post, I’ll share my experience as a family caregiver who’s responsible for maintaining a rental property for her loved one and lay out the pros and cons of being a landlord.
My grandma has owned her rental property since she and my uncle Kenny purchased it when I was in middle school. My mom and I were actually living there at the time. He made an offer to buy it after offering to clean it up for the landlord who owned it back then. Once the deal was done, my uncle Kenny moved us over to the other side and with the help of their church, they remodeled one half of the duplex for the pastor of the church (at the time) to live in.
When my uncle Kenny died, my grandma assumed the role of ‘landlord’ at this property. She relied heavily on men from her church to make decisions about what to do and take care of repairs. For a decade, she never raised the rent or renewed any leases. (Selfish Rachel, in her early twenties, didn’t bother to ask Grandma if she needed or wanted help with the duplex–Grandma probably would’ve just declined the offer, anyway.)
When I started taking care of Grandma, I inherited landlord duty. We set up a separate savings account (a *joint* account) for the duplex. I started depositing the rent there. Thankfully, the property isn’t in a hovel or anything. That doesn’t mean we haven’t had to make some major investments and costly repairs. After the first couple of years, I transferred 75% of it to her savings. The money kept building.
When I created the long term care calculator and realized were were going to be okay, I decided I would use the money she was bringing in from her rental property to pay her caregivers. At the time, it made sense.
After a year of this, the fund started shrinking. Some costly repairs were needed at the duplex and I wasn’t sure what to do.
Anxious about running out of money, and without an approved long term care claim, I talked to my handyman and some other trusted friends. My handyman suggested raising the rent. (It wasn’t the first time I had heard this suggestion–It had been made much earlier in my caregiving journey, but I figured there was no point in rocking the boat at the time). I bit the bullet and sent the letters out.
Shortly after that, her long term care insurance claim was approved, and the money started piling up again. Now, we can fix up the rental property and put that rest aside for future care costs and her current quality of life.
Just like anything else in life, there are both advantages and disadvantages to helping a loved one manage rental properties. If you’re caring for someone who owns their own property, or you’re having conversations about the future and wondering whether maintaining the property is right for you, here are some pros and cons to consider.
- If you feel pretty confident in your loved one’s financial outlook, it’s a great additional income you can use to pay for your loved ones care. As you can tell from our story, if you have someone who is capable of overseeing the upkeep of a property (not just fixing things when they’re broken, but maintaining them), it can be a funding source for long term care.
- It’s a pretty passive (depending on the condition of the property). If you keep an eye on your property–that is, check on it seasonally, make sure the tenants are changing their furnace filters and doing all of the routine things you do to care for your own home, and fix repairs quickly– you really don’t have to do a lot to keep it going. Just like anything else, once you get used to doing something over and over, it becomes like second nature. OR, you can hire a boss handyman like the one we have, and he can keep an eye on things for you 😉
- I’ll be blunt: any property is an asset you can inherit. That is why I plan to help my grandma hold on to my grandma’s rental properties.
- When things go wrong, it can consume a lot of time and money.
- Repairs: if you are not Bob Vila and you’ve never been responsible for fixing problems with a house, it can be very stressful. In most situations, you have to do plenty of research to understand what’s going on, carefully weigh decisions to make sure you’re getting the best price and hiring the most reputable businesses. Not to mention they can cost a lot.
- Renters: Sometimes, you can get great people who pay their rent every month, on time, and take very good care of your property. Sometimes, you get people who you tear S&#( up on purpose (Well, that’s how it feels). Sometimes, you have to deal with difficult situations like people losing their jobs or having other hardships and you have to make tough decisions. If caregiving is stressful enough already, you may not want to be a landlord. That means you’re basically responsible for the roof over your own head, the roof over your loved one’s head, and the roof over your renters’ heads. That can be a lot of roofs to worry about!
- Too much income can be a problem, especially if you’re running out of resources and are looking at government benefits and community services. If you’re considering nursing home facility placement- beware! It’s expensive! What you think might have been a lot of money in savings can be depleted in just a few months’ time. If you couldn’t oversee their care at home, chances are, maintaining a property is outside of your bandwidth as well.
- Typically, you can own property when you are eligible for Medicaid. However, in some cases, a lien may be put on it if your loved one enters into facility-based care so the state can recoup the costs of their care.
How do I know what’s right for our family’s situation?
Contact an “elder care” or “elder law” attorney. They will be able to guide you through all the factors you should consider in planning for future long term care.