Yahoo Finance This Atlanta student wants a grandparent to buy her a house. The Ramsey Show gives a harsh lesson in reality
If you love your grandparents — and they must love you if, say, they're paying for your college education — then maybe it's not such a bad idea for you to test the limits of that love. How, perchance? Simple: Ask them to buy your first house just in time for graduation.
Are you raising your eyebrows right this moment? You're hardly alone.
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On an episode of "The Ramsey Show," co-hosts George Kamel and Jade Warshaw nearly fell out of their chairs when Elizabeth from Atlanta shared the thinking behind the request she wanted to take to a dear old grandparent.
Elizabeth, who is two years from finishing college with a degree in interior design, knows that she's fortunate to be getting through school debt-free thanks to this family member. What's more, they're paying the rent for her current apartment. So, would asking them to buy her first house be such a big jump?
Turns out, yes.
Warshaw laughed at the audacity of Elizabeth's plan.
"You mean to tell me you're going to go to them and say, 'Hey why don't you also buy a house for me to live in?' And then the assumption is that you'll buy it from them because you just get to decide when they're going to sell their house and who they're going to sell it to?"
To which Elizabeth replied: Pretty much.
"That's a tall order," Warshaw said.
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Golden ticket
While it’s tempting to cast Elizabeth as a modern-day, uber-spoiled Veruca Salt, that’s not what Kamel and Warshaw did, audacious as her ask sounds. To begin with, it's clear that Elizabeth's grandparent has a history of setting her up to have high financial expectations. They already pay $2,500 a month for her apartment. Meanwhile, Elizabeth's path to graduate college debt-free represents a major victory, as the co-hosts noted.
The major difference is that homeownership represents a much more complicated proposition financially than rent or tuition. Elizabeth envisions her family buying the house and holding onto it for her until she’s ready to buy it from them. That’s not exactly like asking them to stash a sports car in a garage.
For starters, renting to Elizabeth at the cost of the mortgage deprives the grandparent of the opportunity to make a profit off the investment from a non-family renter. What’s more, the house Elizabeth’’s grandparent would assumedly buy could go down in value and impact their finances. Elizabeth has no skin in the game.
As Warshaw emphasized: "Buying a house is not just kind of like a willy-nilly thing. I don't think you understand how much you're inserting yourself into that person's life and deciding the timeline on their financial investment."
Housing costs
Elizabeth also needs a crash course on the expenses involved in homeownership that she apparently hasn’t stopped to consider, from property taxes to insurance to unexpected repairs that there would be no landlord to cover.
The co-hosts drilled further and found that Elizabeth only had $2,000 saved in an emergency fund: hardly enough to cover the kind of major expenses that longtime homeowners know only too well.
All told, the volatilities surrounding such an housing arrangement could in turn create tension in the grandparent-granddaughter relationship. Enter Kamel, who ended the call with Elizabeth by offering a kind of tough-love encouragement.
“Work your tail off,” he said. “Get a down payment and work on just continuing to stack up cash, and when you're ready to be a homeowner you'll be a homeowner.”
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