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.
11ant schrieb:
But there is one point I want to highlight, or rather consider more deeply than has been discussed so far:
Where does this desire come from, and is it realistic? – how will it affect the father if you renovate the house differently than he imagined? The desire comes from both us and my father.
He currently lives alone in a house that is much too large, and he himself says that he can no longer fully manage everything that needs to be done on his own, which in turn leads to the house falling into disrepair. Moving to a one- or two-room apartment (preferably nearby) is perfectly fine with him.
Regarding the renovation work, we might need to coordinate a bit, that is true, but I don’t see any major problems since we have almost the same ideas (new kitchen, new bathroom, etc.).
In general, he has already said that he is completely fine handing the house over to us and that he won’t constantly interfere.
11ant schrieb:
Is the mother already deceased, or has the father divorced or been left by the mother?
I haven’t found out yet who this father actually is and why only the father is mentioned: is the mother already deceased, or has the father divorced or been left by the mother? The mother (who lives in a rented apartment) is still alive; the two are separated.
This means that any potential proceeds from selling the house would be split in half, which should still be enough for a substantial down payment on my father’s apartment.
Hausbautraum20 schrieb:
Overall, I would approach it the same way.
It might also be an option to agree with the sibling(s) on a market value.
The appraiser costs can reach four figures, and in the end, they only provide an estimate. That would be the ideal scenario.
Unfortunately, I don’t think we can reach an amicable agreement on a market value.
One sibling has already hinted that, in their opinion, future value appreciation of the property over the next few years must also be taken into account, which is why they estimate the value closer to 1 million (location is in a holiday area in southern Germany).
What to make of that is another question … ?
For that reason, in my opinion, it is all the more important to obtain an expert appraisal or opinion from a third party about the house’s value.
The problem would only arise if the house is really appraised at a very high amount.
Then the calculation 600k – 400k = 200k no longer works or it simply becomes financially unfeasible for us.
Patblue schrieb:
That would be the ideal expectation. Unfortunately, I don’t think we can amicably agree on a market value.
One sibling has already suggested that, in their opinion, the future appreciation of the property should also be taken into account, which is why they estimate the value closer to 1 million (location is in a holiday area in southern Germany).
What to make of that is another question... ? I’m all for a fair division among the heirs—unless the testator explicitly states otherwise—but that’s ridiculous.
Let’s assume the current market value of the property is determined, and you buy it from your father at that price. Why should your siblings then share in any increase in value of your property? Or does your brother also share the appreciation of his own house with anyone else?
That would be completely out of the question for me.
But exactly because of issues like these, it’s important to put everything down in writing, in detail and early on.
I’d be interested to hear your brother’s reasoning on why he thinks the future appreciation should be taken into account?
Because he believes that if the house would only be due at a natural inheritance event, it would also be worth more. He is comparing today with some point in the future. What he forgets is that inflation will have also devalued his money by then. So, the higher amount in the future is basically only enough to cover the house. Therefore, the house is not actually worth more. At best, it maintains its value. Or rather, the land increases slightly in value while the house decreases in value.
So, if he discounts the expected inflation and subtracts the anticipated maintenance costs, then this approach works. However, it is a complicated calculation for essentially the same result.
So, if he discounts the expected inflation and subtracts the anticipated maintenance costs, then this approach works. However, it is a complicated calculation for essentially the same result.