Husband With Terminal Cancer Owns 6 Rental Properties And Faces Financial Challenges — 'I Want To Leave My Wife In As Good A Shape As Possible'

A Reddit user shared a poignant story of owning six rental houses while grappling with a terminal cancer diagnosis. The user, who has six to 10 months left to live, asked the community for advice on how to secure the best financial future for his disabled wife. 

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The situation is complex. The user owns six rental properties and a primary residence. Four rentals, purchased in 2001/2002, have over 70% equity. The other two, bought in 2016, have around 30% equity. The primary residence has about $200,000 in equity. All properties were initially purchased with 20% down. Despite the significant equity, $50,000 in repairs is needed across all properties. Additionally, the user has $44,000 in cash reserves and expects a $200,000 life insurance payout.

The properties are all rented, mostly to long-term tenants. The user mentioned reluctance to increase rents, resulting in regular below-market rental income. One tenant, who has been renting since 2001, pays only $50 more now than when he moved in. The primary residence has a VA loan, while the rental properties have standard mortgages. After explaining the situation, he added, "I want to leave my wife in as good a shape as possible. So what kind of strategies should I look at?"

Several Reddit users suggested seeking professional legal and financial advice. One user advised, "You should really meet with an estate attorney," emphasizing the importance of professional guidance. Another commenter, alpine37, said, "You can save yourself tons of time and money by setting up a living trust now." This sentiment was echoed by GoFlyKyra, who added, "Yes! It’s time for a living trust."

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There was a strong consensus on establishing a living trust to streamline the transfer of assets and avoid probate. Given the wife's disability, some suggested hiring a property manager. Optimal-Nose1092 recommended, "Look into a trust. Possibly refi to pay off the mortgage, taxes, and repairs for the primary home." Melted-lithium advised, "Please talk to an estate planner who is ideally also a lawyer or works with one. You need a revocable trust … soon … if nothing more."

Many highlighted the potential tax implications and the importance of a step-up in cost basis, which can reduce capital gains taxes on inherited properties. Witty-Bear1120 pointed out, "Reading this, I don't think your wife really wants to be in the rental business. Sadly, I think the best idea would be to get all the documentation in order for the houses, get in touch with a realtor, and have the properties sold after your death." KieferSutherland asked, "Why not before his death?" while MyHeartVT responded, "Capital gains will be higher beforehand. She will get the step-up cost basis and pay less."

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Recent studies highlight the financial challenges faced by landlords. According to the Pew Research Center, nearly half of individual landlords reported net losses on their properties, with tenant turnover costing an estimated $1,995 per month per unit. The cost of evicting a tenant can be as high as $10,000, with significant expenses involved in managing rental properties, according to a report by TransUnion SmartMove. Despite these challenges, the rental market has shown signs of cooling, with rent growth slowing and vacancy rates rising. 

For those who want the passive income that comes with rental properties, there are options like real estate crowdfunding companies that let you invest in shares of rental properties without the headache or burden of traditional ownership.

While the Reddit poster faces a challenging and uncertain future, planning for the unexpected is crucial. A professional financial planner would likely suggest setting up a living trust and hiring a property manager. They would also emphasize the importance of reviewing the tax implications and possibly refinancing to improve cash flow. Ensuring all legal documents are in order is crucial to protecting the spouse’s financial future.

What are your thoughts? 

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