Buying an investment property from my parents?

Feckofff

My parents would like to retire and have an investment property which would need to be sold. However in order to get a good price the property would require some work.

Ideally I would like to purchase this property but it would have to remain as an investment as I current have an apartment that I live in.

Anybody got ideas on the best way to go about this?

The_Conductor

Honestly- I'd suggest coming to an agreement with your parents as to a fair price for the property- cognisant of the work needed to be done- sell your apartment and live in the investment property- and perhaps let out one or more rooms- to utilise the 14k rent-a-room allowance- while maximising your own enjoyment of the property- and you could do the necessary work as and when you have the time/finances to do so.

If you haven't been a landlord before- I'd be very hesitant to suggest its a good idea- the current regulatory and tax regime is staggeringly lopsided in favour of tenants in general, and against landlords- as a group (though- now, landlords aren't allowed to be a group either- as its been deemed anti-competitive)........ Go figure.

Most sense to me- if you have a couple of bedrooms in the investment property- is sell the apartment- use whatever funds you can unlock to pay for the investment property- and then go rent-a-room to use the 14k rent-a-room allowance- it seems to be a bit of a no-brainer to me. If you have additional funds and/or the means to hold onto your current PPR- I'd still suggest its not necessarily a good idea.

davindub

Feckofff wrote: »

My parents would like to retire and have an investment property which would need to be sold. However in order to get a good price the property would require some work.

Ideally I would like to purchase this property but it would have to remain as an investment as I current have an apartment that I live in.

Anybody got ideas on the best way to go about this?

Speak to an tax advisor before doing anything, look up CGT and CAT rules between relatives.

barneystinson

The_Conductor wrote: »

Honestly- I'd suggest coming to an agreement with your parents as to a fair price for the property- cognisant of the work needed to be done- sell your apartment and live in the investment property- and perhaps let out one or more rooms- to utilise the 14k rent-a-room allowance- while maximising your own enjoyment of the property- and you could do the necessary work as and when you have the time/finances to do so.

If you haven't been a landlord before- I'd be very hesitant to suggest its a good idea- the current regulatory and tax regime is staggeringly lopsided in favour of tenants in general, and against landlords- as a group (though- now, landlords aren't allowed to be a group either- as its been deemed anti-competitive)........ Go figure.

Most sense to me- if you have a couple of bedrooms in the investment property- is sell the apartment- use whatever funds you can unlock to pay for the investment property- and then go rent-a-room to use the 14k rent-a-room allowance- it seems to be a bit of a no-brainer to me. If you have additional funds and/or the means to hold onto your current PPR- I'd still suggest its not necessarily a good idea.

Maybe it's because I've never lived with anyone other than my immediate family or my significant other, but I'd imagine going from living on your own / with a partner, to taking in tenants and living with strangers is far from a no brainer for an awful lot of people...

The_Conductor

barneystinson wrote: »

Maybe it's because I've never lived with anyone other than my immediate family or my significant other, but I'd imagine going from living on your own / with a partner, to taking in tenants and living with strangers is far from a no brainer for an awful lot of people...

I get where you're coming from- however, I just see too many downsides to someone thinking of becoming a landlord at the moment- it simply doesn't add-up to me. Unless there is a seachange in the regulatory and tax regimes- it simply doesn't add up. There are too many downsides.

Feckofff

The_Conductor wrote: »

Honestly- I'd suggest coming to an agreement with your parents as to a fair price for the property- cognisant of the work needed to be done- sell your apartment and live in the investment property- and perhaps let out one or more rooms- to utilise the 14k rent-a-room allowance- while maximising your own enjoyment of the property- and you could do the necessary work as and when you have the time/finances to do so.

If you haven't been a landlord before- I'd be very hesitant to suggest its a good idea- the current regulatory and tax regime is staggeringly lopsided in favour of tenants in general, and against landlords- as a group (though- now, landlords aren't allowed to be a group either- as its been deemed anti-competitive)........ Go figure.

Most sense to me- if you have a couple of bedrooms in the investment property- is sell the apartment- use whatever funds you can unlock to pay for the investment property- and then go rent-a-room to use the 14k rent-a-room allowance- it seems to be a bit of a no-brainer to me. If you have additional funds and/or the means to hold onto your current PPR- I'd still suggest its not necessarily a good idea.

This seems like a good option.
However I don't think my finances would stretch to a purchasing it as a PPR.

Even if the bank would consider the rentaroom for the purposes of a mortgage it would still be 150-200k short of a fair value.

If I could remortgage my apartment I could free up the 20% deposit but it would still be a stretch and probably fairly risky.

Feckofff

barneystinson wrote: »

Maybe it's because I've never lived with anyone other than my immediate family or my significant other, but I'd imagine going from living on your own / with a partner, to taking in tenants and living with strangers is far from a no brainer for an awful lot of people...

The property is large enough that it could be functional split. So both I and my lodgers could have good privacy. Only problem is the finances!

davindub

Feckofff wrote: »

This seems like a good option.
However I don't think my finances would stretch to a purchasing it as a PPR.

Even if the bank would consider the rentaroom for the purposes of a mortgage it would still be 150-200k short of a fair value.

If I could remortgage my apartment I could free up the 20% deposit but it would still be a stretch and probably fairly risky.

With kindness you might have to knock this on the head. The cost for your parents will be too great to consider selling below market value to a blood relative (unless the gain they have made on the property is low).

For example - purchased 2003 200k, MV today = 500k

CGT = 500-200 = 300k * 33% = €99,000 CGT due (minus person exemption 1270) = 98k ish

You pay 300k, parents have just 202k once settling tax.

Also there is a deemed gift to you of 200k *33% as well.There is a class A threshold which will cover up to 310k gift from your parents in a lifetime, but it affects inheritance as well.

It is a pity you didn't make this decision 2 years ago, would have possibly saved 20-30% of the CGT.

But book an appointment with a tax advisor, most of the reliefs are aimed at PPR and business assets of a trading company, but if anyone knows it's the tax advisor.

Feckofff

davindub wrote: »

With kindness you might have to knock this on the head. The cost for your parents will be too great to consider selling below market value to a blood relative (unless the gain they have made on the property is low).

For example - purchased 2003 200k, MV today = 500k

CGT = 500-200 = 300k * 33% = €99,000 CGT due (minus person exemption 1270) = 98k ish

You pay 300k, parents have just 202k once settling tax.

Also there is a deemed gift to you of 200k *33% as well.There is a class A threshold which will cover up to 310k gift from your parents in a lifetime, but it affects inheritance as well.

It is a pity you didn't make this decision 2 years ago, would have possibly saved 20-30% of the CGT.

But book an appointment with a tax advisor, most of the reliefs are aimed at PPR and business assets of a trading company, but if anyone knows it's the tax advisor.

I see what you're saying.

I hadn't expected to pay below market value. Either way it doesn't seem like the figures add up for me.

As a side question to get tax advice how do i go about it?

Should I just look for an account or should I try and find someone who specialises in tax and residential property?

Sorry if these are dumb questions but it's my first time needing tax advice.

wordofwarning

If you are not buying it below market value. Why are you buying it from them? It sounds like a dog of a property, yet you want to buy it at market value?

If you want an investment property, look at the dozens of livable ones in the north inner city of Dublin going for €250-300k with a yield of 12-17%.

I have plenty of friends who parents are 'landlords' ie they brought a property they liked and decided to rent it. It is a vanity investment, rather than a financial investment. If I was to buy a property tomorrow, I would buy a pre-63 in a dog rough area or a mini-mansion on the bad part of the NCR. The yields are massive and there is always demand for property close to the city.

I know someone who was determined to buy an apartment with a yield of 4%. You would make more investing in a foreign REIT. She could make 4 times as much with a property on the NCR. She had zero interest in buying a house on the NCR, as she would not live there...

You need to ask is your parents property and investment property or a property that they call an investment. If it is the latter, move on and forget about it

You sound like you are buying a property that happens to be an investment, rather than a lean and mean investment property.

davindub

They are not dumb questions at all. Its a complex area and you should hear some of the stories that go around regarding tax.

You'd want a member of the Chartered Tax Institute or similar. But your parents should go through their own accountant and who will recommend someone who has experience with succession planning and CGT. They might as well look at their entire assets together and come up with a plan.

You need someone with professional indemnity insurance to cover tax advice, the penalties can be quite severe even for honest mistakes and the advisor would be liable for damages if they gave incorrect advice.

Feckofff

wordofwarning wrote: »

If you are not buying it below market value. Why are you buying it from them? It sounds like a dog of a property, yet you want to buy it at market value?

If you want an investment property, look at the dozens of livable ones in the north inner city of Dublin going for €250-300k with a yield of 12-17%.

I have plenty of friends who parents are 'landlords' ie they brought a property they liked and decided to rent it. It is a vanity investment, rather than a financial investment. If I was to buy a property tomorrow, I would buy a pre-63 in a dog rough area or a mini-mansion on the bad part of the NCR. The yields are massive and there is always demand for property close to the city.

I know someone who was determined to buy an apartment with a yield of 4%. You would make more investing in a foreign REIT. She could make 4 times as much with a property on the NCR. She had zero interest in buying a house on the NCR, as she would not live there...

You need to ask is your parents property and investment property or a property that they call an investment. If it is the latter, move on and forget about it

You sound like you are buying a property that happens to be an investment, rather than a lean and mean investment property.

You are right to question my motives.
My parents would prefer not to sell to the public as it's a difficult area to buy into, and properties rarely come to market.

It is not currently a lean or mean investment property. It would take 100+k to turn it into a corporate let.

I have a lot of sums to do!

Victor

Are you certain you want to buy from parents? One side or other might have different expectations as to price.

wordofwarning

Feckofff wrote: »

It is not currently a lean or mean investment property. It would take 100+k to turn it into a corporate let.

I have a lot of sums to do!

If it is a corporate let, I assume you mean a short term let? A short term let is not eligible for tax relief on mortgage interest. You will get destroyed with your tax bill. As well as paying around 5% on a BTL mortgage, it will not be tax deductible

My two cent is if you really want an investment property, buy a house in the inner city. The yields are unreal

But IMO, your parents house is a non-runner.

Would you consider putting it on the open market to pay the small fee to an agent to see its true value? People like to think their house is worth more than it is

Feckofff

Victor wrote: »

Are you certain you want to buy from parents? One side or other might have different expectations as to price.

We've discussed and know what figure they have in their head. Also I've done back of the envelope cal on a price per square metre for similar properties and those figures are about right. The market in general is quiet buoyant it's hard to nail down an exact number.
However to sell it to the public would require a lot of horse trading as there are several issues, subsidence, roof should be replaced, the extension is not up to standards for today etc
This type of stuff is stressful at the best of times, especial if youth is not on your side.

I am on the fence with regards to buying it. If my parents weren't involved I would not even consider it.

The_Conductor

Don't then- it sounds like it needs a lot of work and tlc- and you've indicated you're stretched financially- you'd be putting tremendous pressure on yourself. If there is subsidence etc- this will be priced into the equation for any seller- yourself included- honestly it sounds like you're trying to do your parents a favour more than do yourself one- and its entirely possible you'd not have the finances to sort the issues when you need to.

Subsidence, a new roof etc etc- seriously- unless you know exactly what you're doing- and getting a really good deal- walk. Let your parents sell- it may even be the case that a prospective buyer may demolish the house and rebuild from scratch?

wordofwarning

Feckofff wrote: »

I am on the fence with regards to buying it. If my parents weren't involved I would not even consider it.

There is the answer you are looking for. You want to want an investment property, but in reality you want to help your parents. Give them a cheque if that is the case.

You are not buying this property with the right intentions