Selling an investment property to a child

Thirsty

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Interesting..

Slightly off topic, but still relevant I hope.

So if I have Property A, presently rented and tax etc., paid on that income in the normal way.

Am I right in saying that I can (legally and legitimately) sell Property A to an adult child, with mortgage repayments to me over the next 20 years and those loan repayments are therefore not subject to tax?
 
If your question is can you sell a property to someone else then answer is yes.

If that property is mortgaged then you may need the banks permission to do so and clear the mortgage.

What is your child going to do with the property: live in it and repay the loan that they owe you over time?

Or rent it out? If renting then there may be an issue with the loan interest. They will clearly have to pay tax on the rental income.

If you incur a capital loss on the sale then that capital loss can only be used to offset a capital gain on a sale to the same person.
 
@Joe_90, unfortunately the question was moved from the original thread which means the context was lost.

So whilst your answer is very nice in details its missing the back ground.

The question concerned selling a property I own to an adult child. I am effectively loaning the money for purchase; instead of paying a bank mortgage they repay the loan to me.

As this is a loan repayment I don't pay tax on the money; whereas as present I have to pay tax on the rental income.
 
So the child will own the house using a 'mortgage' from you.

The child will have to pay the tax on the rental income.

What is the benefit of this to you? You'll have neither the rental income nor the property but you will be paid a monthly repayment of the mortgage/loan you've given the child.
 
@Bronte, wrong end of the stick, and the question being in this forum is a bit misleadi g.

However let me try and clarify further.

Adult child would not be getting rental income, though they could avail of the rent a room scheme if they wished.

The benefit to me is a tax free monthly payment without the hassle and tax liability of being a landlord.
 
So the child is going to live in the house. I don't get the tax free monthly payment, you're just being paid back your own money, over time? Why not just sell the property and pop the cash in the bank.

(I dream about the day I sell up too !)
 
Ok so let's take a step back.

You own a property with no mortgage, say it's worth €200,000 and the rent is €1,000 per month.

You have a number of options:
1) continue to rent.
2) sell up.
3) sell to your child.

With option 1) you continue to receive an income although it is taxable.

With option 2) & 3) your income has stopped and your have realised the capital value of the asset.

You seem to be of the view that option 3) gives you a taxfree return, it does because you have no income and therefore is better than option 1).
 
@Bronte, wrong end of the stick, and the question being in this forum is a bit misleadi g.

It would have been much easier for everyone had you started a new question with an appropriate title in the right forum, instead of tagging it on to someone else's thread.

Brendan
 
Lets not get into a spat.

@Joe_90 I would have an income with option 3. Repayment of loan by adult child to me over (say) 25 years, thats how banks make their money after all :)
 
Lets not get into a spat.

@Joe_90 I would have an income with option 3. Repayment of loan by adult child to me over (say) 25 years, thats how banks make their money after all :)

A repayment of a loan is not an income. Banks make their money from charging interest and fees.
 
You'd be better off selling the house to a stranger, banking the €200,000 and drip feeding it to your current account at €1,000 per month which you can then call "tax-free income" all you want without the risk of your child losing their job and being unable to pay.

This being an investment property, you may be liable to CGT in either case.
 
Lets not get into a spat.

@Joe_90 I would have an income with option 3. Repayment of loan by adult child to me over (say) 25 years, thats how banks make their money after all :)

How is getting your capital, now a loan to child, back, income?

You'll also no longer have an asset, the house, nor it's value, and you've risked your child not paying you back.

Also you're not down the rental income as well.

Why would your child go for this by the way?
 
Thirsty

You are completely confusing yourself.

To simplify it, forget the house completely.

Give your son a loan of €200k.
If you charge 5% interest on this, you will have an income of €10k a year and he will have an expense of €10k.
If you charge no interest, you will have no income and he will have no expense.

If he gives you back the €200k , it's not income. It's a repayment of capital.

He can use the €200k to buy the house from you. Or he can buy a house from an unrelated person.

Your confusion probably stems from people who say "My mortgage costs me €1200 a month", not realising that say €900 is interest and €300 is capital.

Brendan
 
So lets see if I can answer all the points

200k will get very little in the line of interest on deposit; not looking to sell home to 'stranger'.

Child might as well pay mortgage + interest to me as a bank.

House is security for loan so failure to pay has same consequences as regular mortgage. Also if child sells house my loan is repaid first.

Benefit to child is they get to own a house sooner than they might otherwise; plus they can avail of rent a room tax free (now worth 14k a year).

Benefit to me is that I don't pay tax on loan repayment or maintain property etc. So loan repayment of say 1300 per month is better than rental income of 1600 per month.

Sorry other posts crossed so will read those now.
 
Huh !

You are getting rental income of 1600 a month. Or circa 20K annually. Take 3K costs off (pick your number, but averaged out for good and bad years). 17K. Half gone in tax and PRSI and USC = 8K into your hand.

Or is this really about this:

Rent a room

Now Incoem of 14K, tax free, versus current 8. Plus capital repaid by child. I can well see the attraction.

Anyway Thirsty, does your child need or want a house?
 
Take it that all figures are just for illustration

So lets say 8k net income is c.660 per month.

Loan repayments from child to me would be say 1300 per month.

Yes child can avail of additional rent if they wish to do so - lots of people do! :)

As regards your last question.

First up everyone needs some where to live and secondly we have around 80% home ownership so it would be fair to say that the overwhelming majority of people want and need to own a home.

Lets take it that my child is no different!

Edit to correct home ownership
 
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Grand Thirsty. But what is the benefit to you?

And your child would be dead right to use the rent a room. It's a no brainer.

But getting your child on the property ladder, that lovely Irish term, well that can be a good thing. Or not !
 
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