Parents have offered to buy an investment property on my behalf.

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Hi

My parents have offered to arrange to buy an investment property on my behalf. Basically what they want to do is for me to a but a property in my name (using my 1st time buyers stamp duty exemption) and they will finance it. The property or some part of it will be let. Then they plan to sell the property in 2/3 years and give me any profit that they have made to use as a deposit to buy my own house. I think this sounds like a great idea in theory but I have a few concerns.

1 - In order to use my 1st time buyers status and avoid Capital Gains Tax when selling I'm assuming I will have to live in the property.

2 - Will I be liable for tax on the rent received (either way we will be renting rooms out).

I would really like to know if other pwople have experience with this kind of thing before and what general opinions are. To me it just seems too good to be true !!!

Thanks.
 
Yes, you will have to live in the property,

Yes, you will be liable for tax on rent received unless it does not exceed the amounts stipulated in the rent-a-room relief scheme (used to be about €7620, check with revenue for updates)

www.revenue.ie/pdf/it70.pdf for info


Your parents are generous. The upside for you:

1. No deposit saved? No problem.
2. Property declines in value? No problem, your parents take the hit (but see below).

The downside:

1. You use up your first time buyers stamp duty exemption, it won't be available when you "upgrade."

2. You have to live with someone else.

3. If property declines in value your parents may not sell and therefore you get no deposit for your new house. You could always move out and rent out the place to someone else. But do you really want to be a landlord?


Either way your parents' desire to help you out has financial implications you won't be able to get away from easily so you should be comfortable with this.

Do they really need you out of the house that badly :)
 
Thanks for that.

I'm renting at the minute (father thinks it is a total waste).
 
He's only right if property values continue to rise at a faster rate than all other asset classes.

There is nothing wrong with renting - you get the use of a property at what the market decides is a fair price and a degree of flexibility that house owners can only dream about.

When the crash comes renters will be laughing.

Roll on the deluge.
 
Renting doesn't bother me a t all - living in an area I could never afford to buy in.

The more I think about this the more it seems like a bad idea.

If the value of the property decreases my parents will no doubt hold onto the property and continue renting it (still in my name). This would make it impossible for me to take advantage of the decrease in the market if I wanted to buy. Am I right here?
 
Well no, you can still buy at a later date with your own money -- after all it's your parents money at risk here, they're taking the risk. The only thing is that you will have lost your first time buyers stamp duty break.
 
Okay so if the first property is in my name (and remains so) and I buy a second one, what will the tax implications be?
 
The Irish economy is the housing market. Ten years of rampant inflation in house prices has allowed the economy to shift to a well oiled production line, churning out increasing numbers of units. This gigantic housing factory directly employs 20% of the working population, however the spin off financial services, estate agents, building materials and retailers account for another 20%.


Bizarrely the bubble has been perpetuated by a plentiful supply of development land.
Currently there is enough zoned land to accommodate 330,000 new homes, the plentiful supply of land has stopped the bubble reaching critical mass with a short sharp shock, instead drawn out inflation has facilitated socio economic coping strategies to emerge such as intergenerational lending and mortgage fraud. The boom has in effect warped the economy

Interest rates set to accommodate a German economy with record post war unemployment, falling house prices and consumer spending, apply in a country where we have record levels of employment, rising house prices and consumer spending. The Irish economy has plummeted down the global competitiveness table from fourth to thirtieth in the past three years due to the rising costs of doing business. I’m pretty sure that students of central banking are watching the Irish economy with fascination as this trial by inappropriate interest rates is played out.
 
Hi everyone,

Just a quick related question (or four!). How long does one have to be resident in the property to be "living in the property"? Is there a legal limit? How can it possibly be proven? Once the time limit is reached, is it possible then to rent out the house to others?
 
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