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.
Patblue schrieb:
My mother would benefit in this scenario by receiving a direct payout and therefore no longer having anything to do with the house, just as she wishes. No, the calculation is incorrect because the mother is effectively losing a significant amount of money.
Here’s how I see it:
The house is worth €600,000. From that, €240,000 in debts are deducted. Mother and father each receive €180,000.
If the father needs €80,000 of his €180,000, then at most you could talk about an inheritance share of €100,000.
H
Hausbautraum2019 Mar 2021 20:11Patblue schrieb:
The property value is estimated, let’s assume 600,000.
We buy it for 400,000, so the difference of 200,000 is considered an advance inheritance.
My father uses the money (400,000 - 240,000 remaining debt = 160,000 / 2 = 80,000 for each parent) and his savings to buy a nice apartment for himself, ideally also worth about 200,000, which is directly guaranteed to one of the siblings after his passing. I think by now you can guess which sibling I mean (-:
According to his argument, the apartment would also increase in value in the future, from which he would benefit again.
The third sibling is also guaranteed 200,000, at the latest upon inheritance, and only then will the remaining inheritance be divided among the three.
Of course, there is a risk that by the time of inheritance, no 200,000 from both parents will be available anymore.
I still have to figure out how this can be arranged better.
Unless you perhaps have an idea? Maybe the money would be paid by us brothers in an emergency?? I honestly don’t understand this at all.
600,000 - 200,000 = 400,000
For this to work, your mother would have to give you a gift of 100,000, otherwise the math doesn’t add up.
Is she doing that?
Then it gets even stranger:
400,000 - 240,000 = 160,000.
So your father and mother have assets of 160,000.
How on earth are two siblings supposed to be paid or inherit 200,000 each from that??
So everything else you or your family is thinking about seems understandable to me, but the calculation just doesn’t add up.
H
Hausbautraum2019 Mar 2021 20:25Maybe you could share more about your situation?
Perhaps you can manage 600k plus renovation costs after all?
Or maybe the renovation will initially be smaller?
In case of inheritance, your debt burden would decrease later on.
Alternatively, consider an interest-free loan from your father between 100k and 200k. This would reduce your interest expenses and monthly payments, possibly help you secure better bank loan terms, and your dad would know his house is in good hands...
If your dad needs the money, he gets it back, and if not, you keep it as an early inheritance permanently.
Your siblings wouldn’t be significantly disadvantaged by the small amount of saved interest. In the event of inheritance, they would not lose out.
We have small interest-free loans from both parents with final maturity in 15 years. In 15 years, we will have either inherited or renewed the loan agreement. If someone unexpectedly needs the money back, we would have to increase our bank loan. That would be inconvenient for us but still manageable.
So far, we are happy with this solution 🙂
Perhaps you can manage 600k plus renovation costs after all?
Or maybe the renovation will initially be smaller?
In case of inheritance, your debt burden would decrease later on.
Alternatively, consider an interest-free loan from your father between 100k and 200k. This would reduce your interest expenses and monthly payments, possibly help you secure better bank loan terms, and your dad would know his house is in good hands...
If your dad needs the money, he gets it back, and if not, you keep it as an early inheritance permanently.
Your siblings wouldn’t be significantly disadvantaged by the small amount of saved interest. In the event of inheritance, they would not lose out.
We have small interest-free loans from both parents with final maturity in 15 years. In 15 years, we will have either inherited or renewed the loan agreement. If someone unexpectedly needs the money back, we would have to increase our bank loan. That would be inconvenient for us but still manageable.
So far, we are happy with this solution 🙂
P
pagoni202019 Mar 2021 21:00Patblue schrieb:
What reliable agreement would you like to hear? Above all, I would have preferred a less curt reply, but oh well... Reliable: notarized agreement from the parents—only then should early inheritance payments be made to the children providing care. Is that really so difficult? You know what I mean... for sure. It’s called caregiving!
Patblue schrieb:
I think it mainly reflects your own fears, no offense. Thanks for the diagnosis, I’ll take two of those calming drops for the elderly right away. It’s called lived experience in many cases, and this might be another one. The brother has already made his mark, which shocked you, but he wants nothing different from you, only the best! You dangerously downplay the house value and parental claims (your brother exaggerates them), “Mom is just glad about a quick $80,000,” “Dad only wants a camper,” “the siblings don’t want the house anyway”—oops… so we’ll just take it then… what a coincidence. That’s exactly how I read it.
It’s perfectly fine if a child wants the house, but as a senior, I want to be financially secure until the end of my life through MY money. Without that SECURITY (regardless of the mood of the heirs), I wouldn’t recommend anyone taking such a risk. People change… and growing old in uncertainty is a torment.
Luckily, I don’t care about your situation, but I’m probably from a different generation than you and therefore puzzled by such flippant arrogance as I see above. Maybe it was emotional—then be happy that at least someone is thinking about your parents as well. I don’t expect you to hold my sippy cup, but maybe you should think more about who will look after Mom & Dad and how it will be paid for when you yourself have no time or desire.
Accepting criticism or recognizing it as a potential gain because maybe you haven’t thought everything through is not something everyone can do.
Patblue schrieb:
Phew, it’s interesting to see the reactions this situation and the possible decisions provoke in some users here, and how emotionally charged many of the posts are.
You might almost think THEY have to decide themselves. With that in mind, I’ll now focus only on the objectively important points.
Still, thank you for the lively discussion.
Actually, it’s quite straightforward – he built the house himself and now doesn’t want strangers living in it, but prefers to pass it on directly to his descendants.
By the way, this is also a reason why I am looking for a solution where we eventually appear as the homeowners. The siblings have no interest in ever moving into the house.
That’s correct.
However, she has no interest in the house anymore and would prefer to receive the net present value from it.
Therefore, a solution where we buy the house directly and pay her out would be to her advantage.
The father’s wish is to pass the house on to the children.
Is that better?
That’s not quite right.
To put it bluntly, a house in downtown Munich would likely continue to appreciate in value even without major maintenance, or at least would not lose value.
I now share that view as well.
The question is how to realize this, since, as mentioned, we cannot buy the house at full market value plus renovation costs.
My idea would be the following:
The house value is determined, let’s assume 600,000.
We buy it for 400,000, the difference of 200,000 is considered an advance inheritance.
My father uses the money (400,000 minus 240,000 outstanding loan = 160,000 / 2 = 80,000 for each parent) plus his savings to buy a nice apartment for himself, ideally also worth around 200,000, which will be guaranteed to one of the siblings after his death. I think you can probably guess which sibling I mean (-:
According to his reasoning, the apartment’s value would also increase in the future, from which he would benefit again.
The third sibling is promised 200,000 as well, at the latest after the inheritance event, and only then will the remaining inheritance be divided among the three.
Of course, there is a risk that by the inheritance event there won’t be 200,000 available from both parents anymore.
I still have to think about how to arrange this better.
Unless you have an idea? Maybe the money could be paid by us brothers in an emergency?
My mother would benefit from this scenario as she would be paid out directly and, in a way, would have no more involvement with the house, just as she wants.
see above You obviously haven’t read my post thoroughly. If it’s not possible, distancing yourselves is the best option. That will bring peace to everyone involved. Do your thing without worrying about others or relying on them.
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