property investment question - buying out

teal

sorry if this isn't the right forum for this query and i apologise in advance for howlong this post is..but here goes!

i am living and working in ireland for the last 12 years. originally from vancouver.

in 2006 i sold a property in vancouver and made money. i decided to put 40,000 CDN into an investment. as property was much too expensive in ireland at that time i decided to approach my parents with a proposal: that i provide a deposit on a rental property and they secure a mortgage. we rent it out and in 3 to 5 years time, we make a tidy profit, as vancouver properties have risen, on average, about 10 to 15% per annum.

ff to today and what happened....the search began in 2006 for a 2bdrm/2 bathroom condo/townhome in vancouver. prices were around 400,000 CDN and have gone up about 30 to 50% in 4 yrs and are starting to level out now. what my parents ended up doing with the deposit, however, is they purchased a house for 688,000 CDN in a very desirable suburb. this was still talked about as 'our' investment but i have to say the alarm bells were ringing when i began to realise they were emotionally investing in this property and our original deal was morphing into something else. my parents bought a 2500 sq foot home and moved my 87 yr old grandmother into the 2bdrm rental suite downstairs. we have NO WRITTEN AGREEMENT as i put all my trust in my parents in choosing the right property, while keeping me involved via email/skype.

i paid 600 CDN/month (until i talked to them about a 'buy out' this summer), my grandmother is being charged a whopping 1000 CDN month rent and my parents pay the remaining 1300 CDN/month.

here's the rub: i want out of this investment. i made it clear in a verbal agreement with my parents in 2006 that i was looking to invest in a property. i explained to them that Vancouver is a solid market where we would make a nice tidy profit on a rental property over 3 to 5 yrs. i have done comparison values from 2006 to today on the condo market in Vancouver and the average increase over the last 4 yrs is 34% in market value. this would have benefitted all if the original agreement had been adhered to. of note: my parents already own a mortgqge-free condo in downtown Vancouver that they currently rent out for 2000 CDN/month.

my parents recently released my original deposit of 40,000 dollars back to me and said: we've paid you back now. i explained that this isn't an investment if i'm simply getting my money back. that's called a 'lend' of money, which was never part of our original agreement. i also asked about the money i have been putting towards the mortgage and they told me it simply doesn't exist anymore. like magic, it's gone?! they also said that i was only contributing 600 month to the mortgage, which barely pays the interest, but i am wondering about the rental income they charge my grandmother and how this is only being attributed to THEIR portion of the mortgage payment.

my queries are:
1)how do i explain to my parents (who are still reluctantly willing to listen/negotiate) that the house they live in is now worth around 850,000 CDN (so an increase in value of about 25%) and that my 40,000 CDN investment and my monthly mortgage payments mean that i should be seeing some sort of return on my investment?

2) if it is seen as a simple 'buy out', how does this work? do i get my deposit back plus a share of the percentage increase in the property value at the time i was given my deposit back? i tried to explain that as owner-occupiers they will inevitably benefit the most from their investment, but they just keep referring to me being paid a 2% interest on my deposit + mortgage payments when my mom dies as it is written in her will. this means that in a few decades time (thankfully my mother is very healthy and fit), i stand to make about 25,000 CDN on a property that will more than likely be worth well over 1.5 million.

any advice is welcome and appreciated...

teal

Jo King

Your parents are thieves! Go talk to you lawyer and have the lawyer write to them setting out your position.

3DataModem

Assuming the 40k was the total deposit and the balance of 648 was financed you should own 35% of this property.

Basically
- you contributed 40k plus 600 pm
- your folks contributed 1300 pm

Therefore you have been covering 6 / 19 of the finance (6 / 19 times 648 equals 204k. Plus your contribution of 40k up from to the deposit. This is a total contribution of 244k which is 35% of purchase price. Your parents contribution is 13 / 19 of the financed value (648) which equals 488k (=65%).

So ... While I normally advocate working out finance issued within families in this case I really really advise getting a British Columbia lawyer (a good lawyer, not a conveyancer) to draft a letter asserting your rights to the property per the calculation above. Include proof of deposit and proof of mortgage.

You are being boned here, for some reason that I don't care to speculate on... i know plenty of people like your parents and plenty of parents who have done their kids out of money.

Good luck.

PS I visited Vancouver in November and it is niiiice.

teal

many thanks for the input. 3datamodem, your assumption that the 40,000 down payment was the sole deposit on the house is correct.

just to clarify: i stopped paying the mortgage a year ago with the agreement of my parents, as i wanted out of this arrangement. i then was given my 40,000 dollar deposit back in may 2010.

if i have contributed 35% towards the purchase price, does this mean that i would receive 35% of the profits if the house was sold today? what if the house isn't sold for 5 or 10 years or 20 years? i understand the need to seek legal advice but i sure would love to avoid getting lawyers involved if i had an accurate formula/picture to give to my parents.

vancouver sure is niiiiice, alright! but i can't say i want to move back there with all of this rigamarole going on

3DataModem

The 35% figure assumed you had paid the 600 pm all the way up to now, so your actual claim is something less then that, the calculation is much more complex now and also is arbitrary as it depends on the value of the place at the time you stopped paying. Also you got 40k back (and accepted it, however reluctantly) so that complicates things further.

So you kicked in about 60k, got back 40, and the rest is being rolled up at 2 per cent until your mom dies.

Dude read this carefully.

Your mom has written your share into a will. So that means she has contacted a lawyer. You can bet the 2pc rate came from the lawyer... That's as low as he could go for a debt accruing in this manner. If you send a strong email with all the facts and figs I bet you get a refund of the 600 per month payments at a whopping 3% or 4%. Congratulations you've been conned.

Get a lawyer. Yes it will cost you a few hundo CAD ... you think your parents can be negotiated with but i bet you are wrong. Sit down with lawyer (or over phone or email, whatever) and give him all the facts and all the documents. And copies of the Skype and email where your share is discussed. Otherwise you are pi55ing away 100 to 150k or so.

Dude I can show you a house that has lain idle for 30 years because a guy wont sell it or rent it because he thinks his brothers will come looking for a piece. All 3 are above 70. He's waiting for his two brothers to die so he can sell a house that he hasn't set foot in in 30 years... And you could rent this place for over 2k per month or more, easy. Families and money - bad combination.

Get a lawyer or write off the money.

wyndham

Any siblings/other likely benificiaries from your parents estate?