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.
First of all, thank you for the many responses; it’s great to receive such quick help here. I will now address the comments:
Yes, that is a valid point, and we have already discussed it. It would need to be notarized that the siblings receive the same amount at the latest upon inheritance. That is my idea to ensure everyone is treated as equally as possible...
Yes, we are aware of this and are already in contact with a mortgage broker. We have about 50,000€ in equity and have simulated a financing arrangement for 550,000€ at an interest rate of 1.66% and 2% amortization, which is manageable given our current income situation.
That is why we think financing an apartment costing between 200,000€ and 300,000€ would be significantly easier for us.
nordanney schrieb:
For that amount, you can only get an apartment in decent locations. So the 1,000€ is clearly a reduced rent. This means your father is effectively gifting you, for example, 60,000€ over 10 years. What compensation do the siblings receive in return?
Yes, that is a valid point, and we have already discussed it. It would need to be notarized that the siblings receive the same amount at the latest upon inheritance. That is my idea to ensure everyone is treated as equally as possible...
nordanney schrieb:
I conclude from this that a) you don’t have equity and b) no liquidity either. And yet you want to buy an apartment for rental? For 300,000€, the total costs are about 330,000€ (+/-). The bank will likely require 60,000–100,000€ equity from you. Are you aware of that?
Yes, we are aware of this and are already in contact with a mortgage broker. We have about 50,000€ in equity and have simulated a financing arrangement for 550,000€ at an interest rate of 1.66% and 2% amortization, which is manageable given our current income situation.
That is why we think financing an apartment costing between 200,000€ and 300,000€ would be significantly easier for us.
FloHB123 schrieb:
You should definitely clarify this beforehand and also discuss it with your siblings. Otherwise, it might lead to conflicts in a few years. Even if the siblings agree, but their partners don’t like the idea (even though they obviously have no say), it can still create tension within the family.
Normally, your siblings would inherit part of the house. If you make a deal with your father, this might no longer be the case later on. They would then receive nothing because when your father passes away, the house would already belong to you. Maybe they would inherit part of the apartment, but that share would be significantly smaller.
Of course, it might also be that your siblings already own their own houses and are financially well off, so it doesn’t bother them if you get the house.Yes, that definitely needs to be cleared with all parties involved and also notarized.
The first step, however, is to consider HOW this could even be possible, and that’s where I am right now.
If you have any ideas, please share 🙂
ypg schrieb:
The most relevant and obvious scenario is the one you mentioned yourself:
You are looking for an alternative, but only you benefit while everyone else is just a puppet.
Besides the fact that you want to move into an "unrenovated house" (or do you plan to invest money in it),
what happens if you want or have to move elsewhere because of work? What will Dad do with the now empty parental home without rental income? And where will you get your further capital from? Will he have to move again because of you? The point is that my father wants the house to stay within the family. My two siblings are not options for this (they have their own properties, etc.).
I, on the other hand, am looking for exactly this kind of property in our hometown, so it makes a lot of sense for me to take it over. For this reason, I am now searching for a way to make this work while considering the interests of all parties involved, which, as you can see, is quite challenging.
If you have any other ideas, please feel free to share.
ypg schrieb:
Dad dies and leaves behind a house which, thanks to the rental income from the sibling, he was still able to pay off. There is then an inheritance community of three siblings, one of whom still lives in the house. The house is practically unsellable due to the rental situation, and you have been waiting for your inheritance for over 10 years. What you don’t take into account is that we are buying the house at official market value. Just not immediately, but after a few years. So the full value of the house goes to my father (minus any potential gifts, which will also be taken into account with the siblings), and he will then pass this on to his sons through inheritance.
If we didn’t move in and my father had to sell the house to third parties, it would basically come down to the same outcome.
P
pagoni202017 Mar 2021 20:55Is the father leaving the house because
a) he wants to anyway (maybe it’s too big, too difficult to manage, etc.)?
b) especially because he wants to make space for you?
I don’t know the father personally, but why would he suddenly want to live in a one- or two-room apartment as the homeowner? That sounds unusual. Throughout the entire thread, I don’t see any mention of how the father wants to live. Surely he wants to keep the house in the family, but above all, he should be enjoying a comfortable life. If he forgets that, the children should remind him and help ensure he doesn’t forget.
Why not add an extension to the house for the father, effectively creating a multi-generational home with support and partial care arranged through a notarized agreement? This way, the father can stay in the house and remain close to his family. We did something like this ourselves. We received money and took on responsibilities in return. Siblings were fairly compensated through notarized arrangements, and direct payments or a life annuity to the father resolved matters efficiently.
a) he wants to anyway (maybe it’s too big, too difficult to manage, etc.)?
b) especially because he wants to make space for you?
I don’t know the father personally, but why would he suddenly want to live in a one- or two-room apartment as the homeowner? That sounds unusual. Throughout the entire thread, I don’t see any mention of how the father wants to live. Surely he wants to keep the house in the family, but above all, he should be enjoying a comfortable life. If he forgets that, the children should remind him and help ensure he doesn’t forget.
Why not add an extension to the house for the father, effectively creating a multi-generational home with support and partial care arranged through a notarized agreement? This way, the father can stay in the house and remain close to his family. We did something like this ourselves. We received money and took on responsibilities in return. Siblings were fairly compensated through notarized arrangements, and direct payments or a life annuity to the father resolved matters efficiently.
Patblue schrieb:
It would need to be notarized that the siblings receive the same amount by the time of inheritance at the latest. At least that’s my idea to ensure everyone is treated as equally as possible... And where is the money supposed to come from in the event of inheritance? You are living in the house, so selling is off the table!
Patblue schrieb:
What you don’t take into account is that we are buying the house from our father at the official market price. So the full value of the house goes to him, which he will then pass on to the sons through inheritance.
If we didn’t move in and my father had to sell the house, it would basically come down to the same thing. ???? From what money???
You’re talking about money you don’t have.
Buying an apartment on credit, having your father move out, then renting a place in the house yourselves... in the worst case, meaning when inheritance takes effect, there will be an empty rental unit and a parental home occupied by you.
Patblue schrieb:
If you have any other ideas, please share them. I already said: there is no plan that will be fair to everyone. Everything is very one-sided and focused on what you want—there is no sign of equal treatment anywhere, and there won’t be one along this path.
You’re trying to make it look better than it is! But it really isn’t.
Similar topics