Hello,
I am currently in a somewhat complicated situation and am seeking advice here.
The situation is as follows:
My wife and I are currently renting, but we want to move back to our hometown sometime this year or next.
There, as in many other parts of Germany, the real estate market is very tight. In other words, extremely high purchase and rental prices for properties that aren’t really worth that much.
Since we have been looking for a suitable property to buy for quite some time without finding anything appropriate or only finding grossly overpriced options, we have considered moving into the original family home where my father currently lives alone.
In order for us to move in there, it would be necessary for my father to find a 1-2 bedroom (or 1-2 room) apartment for himself. Our idea was that we would act as buyers for that apartment and then rent it to my father.
At the same time, we would move into the family home as tenants and pay rent to my father.
My father would grant us the first option to buy the house, and we could later decide whether to take over the house or not.
Of course, he could also sell the house to us directly at a reasonable price now, but the problem here is:
1. There are still outstanding debts on the house.
2. I have two brothers who also need to be considered. In other words, a gift in this sense is currently difficult without anyone feeling overlooked.
Therefore, the rental model has the advantage that over the next few years, during which our income situation is uncertain (family planning/moving/job changes), we would not face such a high financial burden. Buying an apartment for around 200,000-300,000 euros (approximately 220,000-330,000 USD) is much more manageable for us than purchasing a house for 500,000-700,000 euros (approximately 550,000-770,000 USD).
Additionally, if I understand correctly, when renting to a family member, it is possible to save on taxes (reduce deductible expenses?), although it must be noted that at least 50% of the local market rent must be charged.
Does this make sense?
Have I overlooked something significant?
Or is there perhaps a better solution we haven’t thought of yet?
Thank you very much for your help.
I am currently in a somewhat complicated situation and am seeking advice here.
The situation is as follows:
My wife and I are currently renting, but we want to move back to our hometown sometime this year or next.
There, as in many other parts of Germany, the real estate market is very tight. In other words, extremely high purchase and rental prices for properties that aren’t really worth that much.
Since we have been looking for a suitable property to buy for quite some time without finding anything appropriate or only finding grossly overpriced options, we have considered moving into the original family home where my father currently lives alone.
In order for us to move in there, it would be necessary for my father to find a 1-2 bedroom (or 1-2 room) apartment for himself. Our idea was that we would act as buyers for that apartment and then rent it to my father.
At the same time, we would move into the family home as tenants and pay rent to my father.
My father would grant us the first option to buy the house, and we could later decide whether to take over the house or not.
Of course, he could also sell the house to us directly at a reasonable price now, but the problem here is:
1. There are still outstanding debts on the house.
2. I have two brothers who also need to be considered. In other words, a gift in this sense is currently difficult without anyone feeling overlooked.
Therefore, the rental model has the advantage that over the next few years, during which our income situation is uncertain (family planning/moving/job changes), we would not face such a high financial burden. Buying an apartment for around 200,000-300,000 euros (approximately 220,000-330,000 USD) is much more manageable for us than purchasing a house for 500,000-700,000 euros (approximately 550,000-770,000 USD).
Additionally, if I understand correctly, when renting to a family member, it is possible to save on taxes (reduce deductible expenses?), although it must be noted that at least 50% of the local market rent must be charged.
Does this make sense?
Have I overlooked something significant?
Or is there perhaps a better solution we haven’t thought of yet?
Thank you very much for your help.
When it comes to inheritance, the main point is not that everyone receives an equal share, but that the wishes of the deceased are carried out as much as possible.
In other words, in almost every family, siblings should accept if the father’s will is for the house to remain in the family and, for example, to be sold at a lower price to whoever does not yet own a home. As mentioned before – the father can initially decide whatever he wants!
You mentioned that you can afford financing up to 550,000 (five hundred fifty thousand). Let’s say the house is worth 600,000 (six hundred thousand). One option could be that the father sells it to you for 400,000 (four hundred thousand), and at the same time, a will is drawn up recording that the remaining 200,000 (two hundred thousand) is a “gift” to you as an advance inheritance with a waiver of compulsory portion rights (meaning you would inherit nothing more later). From the 400,000 (four hundred thousand) the father receives from you, he can buy himself a nice new apartment. This can then later be inherited by the other two brothers.
The idea of renting the apartments or house to each other mainly benefits the government. Since the apartment is supposed to be newer, you will hardly have any deductible expenses like renovation costs, aside from the interest. At 66% or even 50% rent, the apartment must generate income → taxes. The house then also provides your father with income for retirement; he probably won’t want to bear major renovation costs, so deductible expenses will be minimal → taxes.
You should get detailed advice from a tax advisor about this, but at first glance, I see tax disadvantages rather than benefits.
In other words, in almost every family, siblings should accept if the father’s will is for the house to remain in the family and, for example, to be sold at a lower price to whoever does not yet own a home. As mentioned before – the father can initially decide whatever he wants!
You mentioned that you can afford financing up to 550,000 (five hundred fifty thousand). Let’s say the house is worth 600,000 (six hundred thousand). One option could be that the father sells it to you for 400,000 (four hundred thousand), and at the same time, a will is drawn up recording that the remaining 200,000 (two hundred thousand) is a “gift” to you as an advance inheritance with a waiver of compulsory portion rights (meaning you would inherit nothing more later). From the 400,000 (four hundred thousand) the father receives from you, he can buy himself a nice new apartment. This can then later be inherited by the other two brothers.
The idea of renting the apartments or house to each other mainly benefits the government. Since the apartment is supposed to be newer, you will hardly have any deductible expenses like renovation costs, aside from the interest. At 66% or even 50% rent, the apartment must generate income → taxes. The house then also provides your father with income for retirement; he probably won’t want to bear major renovation costs, so deductible expenses will be minimal → taxes.
You should get detailed advice from a tax advisor about this, but at first glance, I see tax disadvantages rather than benefits.
P
pagoni202018 Mar 2021 08:54You cannot afford a house on your own, and although your father’s house is not your dream home, if it’s affordable, it could still be a good option.
So you would gain a clear advantage, which in itself is not a problem.
But – what advantage would the father have? Would you take on the possibly necessary care for him? As an older person myself, that is a significant question for me, and so far I haven’t seen anything about it.
You know the saying about the horse and the pharmacy 😀 I have experienced family dramas, and it’s like in a marriage; often the seemingly perfect marriages end in divorce. People change, new people come in, life situations change… unfortunately, I have experienced things myself that I never could have imagined.
There is a way – buying at market value, but…
You use two words here that prevent the plan from sounding truly positive:
The word “somewhat” already implies that it wouldn’t be FAIR, only “somewhat” fair. Any deviation from fair is immediately perceived as unfair, and you shouldn’t fool yourself otherwise. Most likely, that is how it would be seen by others. Reflect on this yourself and think the other way around… a brother moves into the house and gets XYZ…
The second word is “I” in this context. You yourself cannot act completely neutrally here because you naturally see things from your own perspective.
As I have often mentioned, I miss that the highest priorities are fully considered, namely what the father himself wants for his life and how I can personally contribute to making it better and more comfortable for him. WHAT is best for the father?
We are talking about his money, his house, and his inheritance, pushing and calculating here and there…
Would the father move out even without your desire to live there?
In all these discussions, this crucial point tends to be overlooked too quickly. Recently, we had a case where demolition and rebuilding of the grandmother’s house was already planned AND approved by the building authority / planning permission while Grandma was still sitting in her rocking chair knitting socks.
So you would gain a clear advantage, which in itself is not a problem.
But – what advantage would the father have? Would you take on the possibly necessary care for him? As an older person myself, that is a significant question for me, and so far I haven’t seen anything about it.
K1300S schrieb:
That definitely wouldn’t happen with my siblings, but every family is different. It’s up to the original poster to decide how it will work for them.
You know the saying about the horse and the pharmacy 😀 I have experienced family dramas, and it’s like in a marriage; often the seemingly perfect marriages end in divorce. People change, new people come in, life situations change… unfortunately, I have experienced things myself that I never could have imagined.
Patblue schrieb:
If there were a way for everyone to be treated equally right now, I would of course choose that immediately – but unfortunately, such a way doesn’t exist.
There is a way – buying at market value, but…
Patblue schrieb:
I'm looking for a way to handle this somewhat fairly anyway.
You use two words here that prevent the plan from sounding truly positive:
The word “somewhat” already implies that it wouldn’t be FAIR, only “somewhat” fair. Any deviation from fair is immediately perceived as unfair, and you shouldn’t fool yourself otherwise. Most likely, that is how it would be seen by others. Reflect on this yourself and think the other way around… a brother moves into the house and gets XYZ…
The second word is “I” in this context. You yourself cannot act completely neutrally here because you naturally see things from your own perspective.
As I have often mentioned, I miss that the highest priorities are fully considered, namely what the father himself wants for his life and how I can personally contribute to making it better and more comfortable for him. WHAT is best for the father?
We are talking about his money, his house, and his inheritance, pushing and calculating here and there…
Would the father move out even without your desire to live there?
In all these discussions, this crucial point tends to be overlooked too quickly. Recently, we had a case where demolition and rebuilding of the grandmother’s house was already planned AND approved by the building authority / planning permission while Grandma was still sitting in her rocking chair knitting socks.
pagoni2020 schrieb:
You know the saying about the horse and the pharmacy 😀I’m familiar with that, but in my case, I’m speaking from experience. 🙂P
pagoni202018 Mar 2021 09:32K1300S schrieb:
I know that, but in my case, I'm speaking from experience. 🙂 That’s good and also encouraging, luckily that is possible!
I lived in the house with my parents, but everyone had their own separate space; I would do it that way again anytime.
Patblue schrieb:
Good idea, but renovating or adding onto the house is unfortunately not an option; we had already considered that. Why isn’t that possible? Please explain in more detail. Maybe someone here can come up with a suitable idea…
H
HilfeHilfe18 Mar 2021 11:46RomeoZwo schrieb:
When it comes to inheritance, the main point isn’t that everyone receives the same share, but that the wishes of the testator are carried out as much as possible.
This means that, ideally, siblings in any family should accept if the father’s will is for the house to stay within the family, and that it may be sold at a favorable price to the one who doesn’t yet own a home. As mentioned before—the father is free to decide what he wants initially!
You write that you can afford a mortgage up to 550,000 (five hundred fifty thousand). If we assume the house is valued at 600,000 (six hundred thousand), one option could be for the father to sell it to you for 400,000 (four hundred thousand) and at the same time create a will where the remaining 200,000 (two hundred thousand) is recorded as a "gift" to you as an early inheritance with a mandatory share waiver (meaning you would not inherit anything later!).
The father can then use the 400,000 (four hundred thousand) he receives from you to buy himself a nice new apartment. This apartment could later be inherited by the other two brothers.
The idea of the family members renting the apartments or house to each other mainly benefits the government. The apartment is supposed to be newer, which means that aside from interest payments, you will hardly have any costs for repairs or maintenance. With rents set at 66% or even 50%, the apartment will have to generate income—resulting in taxes.
The house will also provide your father with rental income for his retirement. He likely won’t want to cover major renovation costs, and he will have very few deductible expenses—again leading to taxes.
Get detailed advice from a tax consultant on this, but at first glance, I see tax disadvantages rather than advantages. Well, that’s mostly theoretical^^
Once the testator is no longer around, the "carcass picking" begins.
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