My brother and I each invested 10K in a house 10 years ago. Now I want out. How much will I get back?
Ten years ago, my brother and I bought our first house together. Each of us made a $10,000 deposit for a total of $20,000. After a year I moved to another state for work. My brother hired roommates.
After living in an apartment in my new state for about two years, my wife and I decided to buy a house. Since I was still on the mortgage with my brother, we had to jump through a lot of hoops to get approved for our new mortgage. Finally it was approved.
Two years later, my brother wanted to refinance. I still had a mortgage with him, so I had to provide documentation etc. for the refinancing. Again, I jumped through a few hoops, but all was resolved and he was able to refinance.
Another six years later, my brother converted the house into a rental property and was in the process of purchasing his second home. He wanted to refinance again, but this time I asked to be taken off the mortgage and have my investment paid out.
“After a year, I moved to another state for work. My brother hired roommates.’
How much should I get back? His point of view: $10,000 in, $10,000 out. My point of view: If I had received $10,000 during its original refinancing eight years ago, that money would have grown in savings or in the stock market. I believe the reasonable return on my investment would be a modest gain of 5% per annum over the 10 years.
His original $10,000 investment is now worth $70,000. I’m not asking for a 50/50 split on that return; after all, he took on most of the risk by living there. My only exposure would have been my credit report if he and his roommates stopped paying the mortgage.
So yes, I had the skin in play – just not that much, hence the modest return of 5% per year. What would you consider a fair deal in the situation?
The other brother
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I’m not a big fan of the “If I did this, I could have done that” argument. You both decided to invest $10,000 in this house instead of the stock market – and whether or not your brother could afford to buy you out eight years ago and/or you wanted out, you both took the same amount of risks. and jumps. Those risks included that one or both of you may not be able to pay the mortgage and/or that one or both of you may want to change the status of the loan agreement.
If you just sign the mortgage, I agree to a return on your original investment, plus a mutually agreed upon interest rate as a goodwill gesture. If you were a co-signer and co-owner, then your brother would have to buy you out of your share of the property.
The risk was 50/50 and the rewards were 50/50. Yes, he lived there and looked after the house, but you lived in a separate state and had additional living expenses.
Ownership is based on whose name(s) are on the deed, not who chooses to live in the house. So what about that mutually agreed-upon interest rate as a co-signer, but not as a co-owner? If you’re both open to negotiation, I’d recommend you both get out of it what you put into it. Whoever has paid property taxes and general maintenance must deduct them from the final amount of the other brother’s share. Then you split it in the middle.
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