Buy to let.

[cormac]

I have recently retired,a pension of about 47,000.I own a house valued about 450,000 and an apartment valued about 380,000.I have savings of around 160,000.The house has become too big for myself and my wife and we are considering buying an apartment for 430,000 and taking life a little easier.My son who is unmarried lives in our apartment has savings of about 200,000 on deposit which he would like to put to better use and is considering a buy to let.As a first time buyer,would it make sense for him to buy the apartment we are considering and let it out to us.He will eventually end up with half of what we leave.

 

[ClubMan]

I have recently retired,a pension of about 47,000.I own a house valued about 450,000 and an apartment valued about 380,000.I have savings of around 160,000.The house has become too big for myself and my wife and we are considering buying an apartment for 430,000 and taking life a little easier.

But doesn't this mean just a €20K surplus from the sale of your home? Less selling and buying costs. How is that going to make things easier? Perhaps you mean a newer property with less maintenance or something?

My son who is unmarried lives in our apartment has savings of about 200,000 on deposit which he would like to put to better use and is considering a buy to let. As a first time buyer,would it make sense for him to buy the apartment we are considering and let it out to us.He will eventually end up with half of what we leave.

If he is not going to live there as well then his FTB status is irrelevant as he will be buying as an investor. But he will also lose his FTB status in relation to any future purchase of a home for himself in doing this. In general it probably doesn't make sense for FTBs to lose their FTB status by making their first property purchase an investment one.

I suspect that you need to get independent, professional advice on how best to manage your estate from a tax point of view in terms of passing it on to your next of kin. Similarly you and your son may need advice on how best to manage your other affairs and property holdings.

 

[Hel_n]

Am I missing something here?!

Why would your son live in an apartment owned by you to purchase an investment property to let to you?

Surely the obvious thing to do would be for your son to buy his own apartment/house and live in it as his PDH and for you to sell the house you're living in and move to the apartment that you already own?

He will still be left with half of what you own when you die and he will be using his status as a FTB to his full advantage... while you can live in a more manageable apartment that you already own.

 

[cormac]

Basically my son lives in our apartment rent free in Dublin.He would like to return to his roots in Clare when the time is right.By renting a desirable apartment from him I would rid myself of a problem,free up assets and have 500/600K which would easily cover rent etc.When the time is right I would be in a position to help him should he wish to locate in another town in Clare.Other than stamp duty I cannot see where he would lose.He would have a secure tenant,would eventually own the property,and come into a healthy inheritance.I would be on the pigs back and a few quid from the tax man by renting.I'm not the brightest in the world but this seems to solve his problem and mine.Am I missing something.

 

[ClubMan]

Basically my son lives in our apartment rent free in Dublin.

Charging him rent would certainly assist you in taking it a bit easier in retirement! Sounds like he's old enough and well enough off to stand on his own two feet and pay rent for accommodation.

Other than stamp duty I cannot see where he would lose.

He loses his FTB benefits by buying an investment property as his first foray into the property market. If/when the property becomes his PPR and he eventually sells up then some portion of any resale gain will be assessable for CGT which would not be the case for a property which was always a PPR and never rented out. These issues need to be weighed up.

I would be on the pigs back and a few quid from the tax man by renting.

I don't understand this point.

 

[cormac]

What you say is true ,he is big enough and ugly enough to pay me a rent,but he is still our baby and we don't need the money.If I buy the apartment I would have to immediately put our house on the market,arrange bridging loans and put myself under pressure which is something I would like to avoid.I accept he would be stung for the gains tax but that would be his baby which and as he will end up with our hard earned cash,he won't be doing too bad.He could end up keeping the apartment as his holiday retreat.I am most grateful for your comments,I am trying to square the circle,and in the end I will have to make the plunge.

 

[ClubMan]

but he is still our baby and we don't need the money.

I have recently retired,a pension of about 47,000.I own a house valued about 450,000 and an apartment valued about 380,000.I have savings of around 160,000.The house has become too big for myself and my wife and we are considering buying an apartment for 430,000 and taking life a little easier.

If you want to take things easier then charging tenants rent would be a good start.

I accept he would be stung for the gains tax but that would be his baby which and as he will end up with our hard earned cash,he won't be doing too bad.

I'm just pointing out the potential drawbacks of his first property purchase being an investment one. I think that these are significant. He may decide that they are acceptable to him. As ever it's a cost/benefit exercise.

 

[cormac]

Most grateful,it is as you say a cost benefit exercise.