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.
S
saralina8720 Mar 2021 07:47Completely without judgment:
I also find it interesting how emotional these topics are always discussed, basically.
In my opinion, Joedreck is right. All or nothing. Any other approach will sooner or later cause problems.
But, I’d like to add briefly – the father is a responsible adult. If he wants to secure his own care, he is free to do so. I find it strange to always hear this attitude referring to the “offspring who exploit their parents.” But it doesn’t hurt to consider all perspectives.
I also find it interesting how emotional these topics are always discussed, basically.
In my opinion, Joedreck is right. All or nothing. Any other approach will sooner or later cause problems.
But, I’d like to add briefly – the father is a responsible adult. If he wants to secure his own care, he is free to do so. I find it strange to always hear this attitude referring to the “offspring who exploit their parents.” But it doesn’t hurt to consider all perspectives.
T
T_im_Norden20 Mar 2021 07:59I find it interesting how some expect to inherit their parents’ property and already start mentally dividing the spoils.
S
saralina8720 Mar 2021 08:04T_im_Norden schrieb:
I find it interesting how some expect to inherit their parents’ property and already mentally divide the assets. Have your parents not talked to you about the potential inheritance? Or do you not discuss it with your children?
I consider it completely normal; my parents already did this when I was 20. They wanted to ensure the estate is distributed as fairly and sensibly as possible, and of course, these conversations take place together with my sister.
On the other hand, I find it strange not to settle such matters while everyone is still alive.
T
T_im_Norden20 Mar 2021 08:08I told my parents to live however they want and do whatever they wish with it. After all, they worked hard for it, not me.
I know that I will most likely inherit nothing. Anything of real material value will have to be liquidated to cover care costs, and I consider myself fortunate not to be required to contribute to my parents' support. I don’t expect to see anything from either of the two condominiums...
And to be honest, I don’t see a reason to leave my children anything substantial besides a debt-free situation.
And to be honest, I don’t see a reason to leave my children anything substantial besides a debt-free situation.
S
saralina8720 Mar 2021 08:36T_im_Norden schrieb:
I told my parents to live as they want and do whatever they feel like.
After all, they worked hard for it, not me. But one doesn’t exclude the other. Especially when it comes to real estate, I think it’s useful to have a conversation—what do the parents want, how do the children see it...
Hmm. Maybe in our case this is because we no longer come from farming families as of the second generation. In families like these, most (if not all) arrangements are still made and handed over during the parents’ lifetime. Not always without conflict, I wouldn’t claim otherwise, but that’s more the rule than the exception.