So shortly after my wife and I had our first kid a few years ago, we came up with an idea to get my parents to move closer to us, since they used to live across the country. My wife had been wanting to figure out a way to get a second house, since we have 2 kids now and she really wanted to have 2 houses to leave them. Also her family is Asian and they are big on owning property and investing in property, and I think she wanted to continue that.
Anyway, we came up with a plan that made sense to us at the time and seemed to care of a lot of things at once. We would buy a second house not too far from our current house and rent it out to my parents (since we could not afford to just give them a house). They would rent out their current house, and pass on that rent to us to cover most of the mortgage on the new house.
This seemed like a win-win. They get to move closer to us and their grandkids and get a new house in a much better city (in my opinion). They also end up much closer to my sister as well. They essentially would spend $0 to do this. We would get a second property for our kids, we would have them around to help with the kids sometimes, and we'd be much more able to help them as they age. We also get tenants that are reliable and consistent and don't have to worry about renting to strangers. In many ways this has worked out because it's great seeing my kids have such a good relationship with their grandparents that they never would have otherwise.
Unfortunately we have quickly learned why people say not to get into business dealings with family. Basically my parents and this new house has turned into a colossal money pit that we cannot escape from, and I also think my wife had unrealistic expectations of how this would work out.
We agreed to do some work on the new house before they moved in, but that somehow has turned into a full remodel of the house, which we are paying for. They act like homeowners when it comes to decide what to do on the house, and then they act like tenants when it comes time to pay for things. Now we have spent several tens of thousands of dollars on their house, which is sitting unfinished because we basically had to shut off the money valve so we wouldn't go broke. Instead of passing on all of the rent from their old house to us, they are only paying a fraction, and using the rest to cover their property taxes, maintenance on their house, and to have an income. So we are just barely able to pay the mortgage. And they had to do repairs on their house before it could be rented, which they also expect us to pay for. And by us I mean my wife's parents, who are funding all of this.
The biggest sticking point currently that I'm having trouble resolving is who should pay for their old house. They think it's fair that they use the rent money to cover taxes and repairs, and pay us the remainder, and that we should pay them back for the work they did on their old house before they moved, because they moved to help us. My wife thinks that it's not fair that we have to pay for repairs and taxes for a house that we do not own. On top of this I'm not sure my parents can afford to pay for the repairs and taxes for their house, but they would have had to pay for all of that whether they moved or not. We can't afford to pay them either on top of what we are paying for our house and their new house. Currently I am in the middle trying to negotiate but I don't know who is right and what is fair.
TL;DR My wife and I bought a house for my parents to rent near us, but it has become a money vacuum and I'm not sure what is the most fair way to fix it.