Give Money, Not Houses
When family asks for help, what kind keeps the relationship intact?
"Help family with cash, never with an asset you're responsible for."
Meet Scott. He sold his company for enough money that he and his wife never have to work again, and he did what most generous people in his position would do: he tried to help his extended family.
After we sold the company, one of my wife's sisters was down and out, divorced with kids, so we bought a townhome and let her live in it for free. Another sister's marriage ended suddenly and she had three kids, so we bought a house near us and let her stay there for free. My own sister had lived in a trailer most of her life and had just lost her husband, so we bought a house she could live in for free too. All they had to cover was the basics: utilities, HOA dues, that kind of thing.
In our heads the math was obvious: no house payment meant they could finally start saving, get out of debt, and have a real chance to get ahead. We realized almost immediately that wasn't happening. Nothing improved in their lives financially. They couldn't even keep up with the basic utilities, and they were living rent free. To make matters worse, a hailstorm meant I had to buy a new roof for one of the houses. At another house, a bathtub overflowed and caused mold. At the third house, one sister slipped on ice taking the trash out and seriously hit her head, and now we had an injured tenant asking whether our insurance policy covered slips and falls.
We realized that even though we were trying to help, the helping had created a huge burden on my wife and me. We had become full-time landlords, responsible for all the expenses and headaches that come with managing the upkeep of three different houses. And as the months passed and none of their financial situations improved, even with a free house to live in, we started to ask ourselves, are we actually helping our family members, or are we enabling them?
So we unwound it. We gave each family nine months to move out so we could sell the houses and get rid of this mess we'd created for ourselves. Doing so destroyed the relationships with all three permanently.
We had a much better experience right after the company sold, when we gave $30,000 checks to other extended family members, no strings attached. Here's thirty grand, do with it what you want. My wife and I have never regretted that choice. We don't know what most of them did with the money and we don't care. Whatever they did with it, it never created a burden for us the way the homes did.
Here's what we figured out. When we gave money, it left our hands and our heads. When we bought a house for someone else to live in, it never left either one. Every repair was our problem, every choice they made was our business, and since the whole point was to help them get ahead, every month they didn't get ahead felt like they were taking advantage of our generosity. In hindsight, we would have been better off handing each of them $100,000, no strings attached, instead of becoming their landlords.
Up next · Lesson 11 Become the Expert First Every deal arrives with a good story. Who in the room actually knows the business? Read next →