Buying house for my mother, rent out her old one?

hi,

due to a change in my mothers' circumstances, she is hoping to move near me and my family about 30 miles away. Also the family home is very big and too much for her now. Rather than sell family home (my father in nursing home and not keen to see it go), what are implications of renting it out (we would get approx 2k per month for it) and buying an apt for her near me. She doesn't want to rent. As she is over 65, she can't get a mortgage (right?), so I was going to take out a mortgage to buy an apt and the rent from the 'big' house can pay the mortgage. (I have enough equity in my own house, but could never afford 2k per month repayments). We could cover stamp duty, solictor etc with savings. My mother is happy with this arrangement, if it is doable. Is the concept viable?

1. Can I do an interest only mortgage and offset it against rent received on a different property?
2. What's implication of this Prinicple residence thing and capital gains, for my mother's big house? Anyone have a link for that.
3. I am happy to get professional financial advice (and pay for it) if someone can recommend someone.

Thanks so much for any thoughts!

KK

any comments on the idea of renting out a bigger house and using the rent to pay for a smaller one? Would really appreciate some ideas. Thanks!

You only pay capital gains tax if you sell the house. €2000/month rent sounds a lot.

hi Johnny,

but say we needed to sell the house in the future (for her to go into a nursing home for example), would she pay capital gains on the full value of the house, or how is it worked out? I have tried Oasis.ie but it's not clear how it is worked out.

I agree 2k a month is a lot, house is 5 bed in Dalkey and similar ones seem to rent for well over 2k.

Is the concept workable in principle though, or have we missed something critical?

As far as I know Capital Gains Tax is payable on a pro rate basis so if you lived in the house for 20 years then rented it out for 5 years, then it was rented for 20% of the time owned so when you sell it you would pay CGT on 20% of the profit. Or something like that. Search on this site there is better examples somewhere.

I suppose your parents would be the official recipients of the 2k a month and would be liable for income tax on that. Would this extra income affect any of their current benefits eg medical card, pension, nursing home etc?

kiki35 said:

Is the concept workable in principle though, or have we missed something critical?

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Leaving the parents aside, what you are looking to do is buy an apartment you cannot afford and pay for the mortgage using a not guaranteed income gift from a third party. If I was a bank manager my eyes would fall out if I saw that on an application. 2 grand does sound a lot, you would probably need a spend to outfit the house for the rental market if you wanted to achieve that much.

The tax issue raised above is very valid. Also, what happens if you cannot achieve the rent you require? What happens if there are months where you don't rent the house at all? What if after several months of not renting the house, what lower figure would/could you accept?

I agree with your getting financial advice on this, too many variables to consider - a 5 bed in Dalkey must be worth a pretty penny, selling the house may turn out to be the correct way to go. I'd also run the general concept of paying the mortgage via the third party rent by the bank first before you go see an accountant, I don't see it as a runner.

thanks for the tips - It was just a long shot, I guess we can't afford it! Will talk to my bank manager anyway just to see. Does anyone have name of good finanical person for advice? (even though this site is fab, I guess my mom will want to talk to someone face to face.) thanks again!