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Buying property from parents who will also buy my apartment

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  • 01-03-2021 6:45pm
    #1
    billybonkers
    Registered Users Posts: 2,293 ✭✭✭


    I would like to purchase a property from my parents (a house not their main residence, investment property about 15 years ago) and in turn sell them my apartment as they wish to keep some sort of investment property.

    Not trying to avoid any Stamp Duty or anything and will be paying market value so there should be no CAT issues.

    I know there will be CGT payable by them on any profit, which their wont be as it has decreased in value.

    Apartment value is €350,000. House value €470,000 (120k difference, which I can no afford due to higher salary now)

    Would this be treated as a normal sale at market value?
    Is this a common occurrence, can we arrange for bank transfers on same day to keep the banks happy?
    Do I need to clear my mortgage first and then apply for a new one?

    Anyone have any knowledge or experience with this?

    Thx


Comments

  • Options
    #2
    Claw Hammer
    Registered Users Posts: 6,160 ✭✭✭Claw Hammer


    This is more of a question for the Tax foru.


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    #3
    CiboC
    Registered Users Posts: 509 ✭✭✭CiboC


    You should explore taking advantage of gift/inheritance tax thresholds.

    You can gift your parents 335k, if 350k is the market value of the property that only leaves a difference of 15k.

    I would look into gifting them the 335k value of the apartment. They could them either pay the CAT tax on the difference or they pay you the balance of 15k.

    If they pay you the 15k, you can then (separately from the 335k threshold) gift your father back 3k and also your mother back 3k. Are you single? If not your spouse has a separate entitlement to a CAT free gift / inheritance from your parents.

    Regarding the parents house, the same thing apples. They can gift you 335k CAT free, you then have to decide how to deal with the balance.


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    #4
    athlone573
    Registered Users Posts: 726 ✭✭✭athlone573


    It sounds relatively straightforward, from the bank / solicitor perspective it won't make much difference that the sale of one property and the purchase of another are with the same counterpart, still need to close a mortgage, open another and pay stamp duty.

    I'd be making sure you have your new mortgage lined up then find a solicitor who can run through the details with you.

    I don't see how gift tax is relevant if this is an arms length transaction but no harm to keep valuations on file just in case.


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    #5
    cruizer101
    Registered Users Posts: 3,205 ✭✭✭cruizer101


    I wouldn't be going near gift tax if you don't need to, no point in using it up on what is a relatively normal transaction, then when actual inheritance happens you will end up paying significant tax.


  • Options
    #6
    Marcusm
    Registered Users Posts: 10,184 ✭✭✭✭Marcusm


    CiboC wrote: »
    You should explore taking advantage of gift/inheritance tax thresholds.

    You can gift your parents 335k, if 350k is the market value of the property that only leaves a difference of 15k.

    I would look into gifting them the 335k value of the apartment. They could them either pay the CAT tax on the difference or they pay you the balance of 15k.

    If they pay you the 15k, you can then (separately from the 335k threshold) gift your father back 3k and also your mother back 3k. Are you single? If not your spouse has a separate entitlement to a CAT free gift / inheritance from your parents.

    Regarding the parents house, the same thing apples. They can gift you 335k CAT free, you then have to decide how to deal with the balance.

    This would be completely wrong! There are no gifts involved.


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  • Options
    #7
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    Why does anyone need to sell.

    Can you not just move into house and pay them rent? While you retain your apartment and receive rent? They will still own their investment property and you will still own your apartment. Why does it have to be complicated.


  • Options
    #8
    3DataModem
    Registered Users Posts: 3,944 ✭✭✭3DataModem


    Baby01032012 wrote: »
    Why does anyone need to sell.

    Can you not just move into house and pay them rent? While you retain your apartment and receive rent? They will still own their investment property and you will still own your apartment. Why does it have to be complicated.

    Both rents will be taxed.


  • Options
    #9
    Claw Hammer
    Registered Users Posts: 6,160 ✭✭✭Claw Hammer


    billybonkers wrote: »
    I would like to purchase a property from my parents (a house not their main residence, investment property about 15 years ago) and in turn sell them my apartment as they wish to keep some sort of investment property.

    Not trying to avoid any Stamp Duty or anything and will be paying market value so there should be no CAT issues.

    I know there will be CGT payable by them on any profit, which their wont be as it has decreased in value.

    Apartment value is €350,000. House value €470,000 (120k difference, which I can no afford due to higher salary now)

    Would this be treated as a normal sale at market value?
    Is this a common occurrence, can we arrange for bank transfers on same day to keep the banks happy?
    Do I need to clear my mortgage first and then apply for a new one?

    Anyone have any knowledge or experience with this?

    Thx

    Onc e you have the funds to clear you existing mortgage and the parents have enough to clear their mortgage there should be no problem. You and your parents should engage separate firms of solicitors and each should give identical instructions as to how the transaction is to proceed. The key issue is whether your parents wiull need a mortgage to buy your place.


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