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.
Tolentino schrieb:
Maybe this one?
“Whoever ruins their own family will inherit the wind, and the fool will be servant to the wise!”
Proverbs 11:29 I have to admit, I’m like Bishop Hemmelrath: whenever I bet on Bible verses against Father Braun, I lose every time ;-)
https://www.instagram.com/11antgmxde/
https://www.linkedin.com/company/bauen-jetzt/
hm
Patblue schrieb:The mother has the right of first refusal. If the house is sold, it can only be done with her consent!
There is also a mother (living in a rental apartment), and they are separated.
Patblue schrieb:For me, "perfectly acceptable" is not really close to "agreed upon" or "desired."
Moving to a one- or two-room apartment (preferably nearby) is perfectly acceptable for him.
Patblue schrieb:Without maintenance, the value of the house will decrease.
also has to factor in the expected increase in property value over the next few years,
Everything written further confirms my opinion. Buy the house at the market price and have peace of mind on all sides. If that is not possible or not desired, distance yourself from the whole project. You can already tell by the greedy brother how the atmosphere will be otherwise.
Phew, it’s quite interesting to see the reactions this situation and possible decisions provoke in some users here, and how emotionally charged many of the comments are.
One might almost think THEY themselves have to decide. With that in mind, I will now only address the factually important points.
Still, thank you for the lively discussion.
Actually, it’s quite obvious – he built it himself and now doesn’t want strangers to live there but prefers to pass it on to his direct descendants.
By the way, this is also a reason why I’m looking for a solution in which we eventually become the homeowners. The siblings have no interest in moving into the house at any point.
That’s correct.
However, she has no interest in the house anymore and would prefer to receive its current cash value.
So, 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.
Better?
That’s not entirely true.
To put it bluntly, a house in downtown Munich would very likely continue to appreciate in value or at least not lose value even without extensive maintenance.
I now see it the same way.
The question is how to realize this since, as mentioned, we can’t buy the house outright at market value plus renovation costs.
My idea is the following:
The house value is determined, let’s say as an example 600,000 EUR (approx. $650,000).
We buy it for 400,000 EUR (approx. $430,000), the difference of 200,000 EUR (approx. $215,000) is considered an advance inheritance.
My father will buy himself a nice apartment for about 200,000 EUR (approx. $215,000), preferably secured to one of the siblings after his passing, from the 400,000 EUR minus 240,000 EUR (approx. $260,000) remaining debt = 160,000 EUR (approx. $172,000), divided by 2 = 80,000 EUR (approx. $86,000) for each parent, plus his savings. I think you can 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 also guaranteed 200,000 EUR (approx. $215,000), at the latest upon inheritance; only then will the remaining estate be divided by three.
There is, of course, a risk that at the time of inheritance there may no longer be 200,000 EUR available from both parents.
I still need to think about how this can be arranged better.
Unless you have an idea? Maybe the money would be paid by us brothers in an emergency?
My mother would benefit in this scenario because she would be paid out directly and thus have nothing more to do with the house, as she wishes.
See above.
One might almost think THEY themselves have to decide. With that in mind, I will now only address the factually important points.
Still, thank you for the lively discussion.
11ant schrieb:
I haven’t yet understood from the answer why it is important to the father that the house stays in the family. It shouldn’t matter to him in his new apartment – so why doesn’t it? This motive should be examined.
Actually, it’s quite obvious – he built it himself and now doesn’t want strangers to live there but prefers to pass it on to his direct descendants.
By the way, this is also a reason why I’m looking for a solution in which we eventually become the homeowners. The siblings have no interest in moving into the house at any point.
ypg schrieb:
Hm
The mother has the right of first refusal. If the house is sold, only with her consent!
That’s correct.
However, she has no interest in the house anymore and would prefer to receive its current cash value.
So, a solution where we buy the house directly and pay her out would be to her advantage.
ypg schrieb:
“Fully okay” is not exactly the same as “accepted” or “desired” from my perspective.
The father’s wish is to pass the house on to the children.
Better?
ypg schrieb:
Without maintenance, the value of the house decreases.
That’s not entirely true.
To put it bluntly, a house in downtown Munich would very likely continue to appreciate in value or at least not lose value even without extensive maintenance.
Joedreck schrieb:
Everything that has been said confirms my opinion: Buy the house at market price and then everyone can have peace. If that’s not possible or wanted, step away from the whole project. You can already tell how the mood would be from the brother’s greed.
I now see it the same way.
The question is how to realize this since, as mentioned, we can’t buy the house outright at market value plus renovation costs.
My idea is the following:
The house value is determined, let’s say as an example 600,000 EUR (approx. $650,000).
We buy it for 400,000 EUR (approx. $430,000), the difference of 200,000 EUR (approx. $215,000) is considered an advance inheritance.
My father will buy himself a nice apartment for about 200,000 EUR (approx. $215,000), preferably secured to one of the siblings after his passing, from the 400,000 EUR minus 240,000 EUR (approx. $260,000) remaining debt = 160,000 EUR (approx. $172,000), divided by 2 = 80,000 EUR (approx. $86,000) for each parent, plus his savings. I think you can 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 also guaranteed 200,000 EUR (approx. $215,000), at the latest upon inheritance; only then will the remaining estate be divided by three.
There is, of course, a risk that at the time of inheritance there may no longer be 200,000 EUR available from both parents.
I still need to think about how this can be arranged better.
Unless you have an idea? Maybe the money would be paid by us brothers in an emergency?
My mother would benefit in this scenario because she would be paid out directly and thus have nothing more to do with the house, as she wishes.
Tassimat schrieb:
Which side is the mother actually on? What is her relationship to the father and all the other parties involved? She has the upper hand with a veto right.
See above.
pagoni2020 schrieb:
The focus should be on "beautiful" and "special" for Dad, but here it seems rather left to chance, "preferably nearby." That sounds too casual to me...
"Okay" is just a mild version of terrible (sorry). Why should a homeowner (father) live in mediocre conditions going forward? As he gets older, he will spend more time inside the home, so it needs to be comfortable and pleasant for him, with the right size, location, and amenities. That’s being overlooked here! And... still no answer regarding care/support!!!
"Preferably nearby" does not sound like a reliable agreement to ensure that the father will experience security and comfort in old age from those previously benefiting. The advantage is great, but it should be reciprocal.Just a quick note on this:
My father is a motorhome traveler; if everything goes as he hopes, he will spend half the year not in Germany/in his apartment but in the sunny Mediterranean region.
What kind of reliable arrangement would you like to hear?
I already said that I’m happy for him to live directly on the neighboring property so I can check on his wellbeing, comfort, and care in old age every day. That would be fine with me. But for him, that’s not an issue at the moment.
Good point that definitely needs to be clarified, thanks for that.
However, I think it mostly reflects your own concerns, no offense. 🙂
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