Youngest is in a very expensive rent area, though not quite to Boston levels. We could provide a mortgage to him to buy a property and his payments to us would be cheaper than renting, particularly if he has a roommate move in to help him pay for it. That roommate could even be us if we find a place with an in-law suite, as we are considering a more nomadic lifestyle and just need a home base near a great city and good airport. His pay isn’t bad, but it’s useless trying to buy a place there without paying cash.
We considered buying and renting back to him, but not looking to get back into the tax implications of a rental…they were only touched on here. This way he also has skin in the game and would hopefully rise to the occasion. We have a year before we do more than figure out the area. Want to make sure he loves the job and area as much after a hot summer of humidity.
We got to this point in our thinking after putting down on paper what our goals were:
- Help Youngest afford a decent place to live and build equity
- Avoid conflict by owning outright where he lives
- Avoid tax consequences of owning a rental
- Have independent living space for us nearby
Your goals are clearly different, but you could potentially have different options to satisfy your goals. For example, if you can afford to do so, what would be the tax implications of buying the property as a life estate for your elderly relative. Could they “gift” you money each year so that it would not be income? Not enforceable, which makes it a gift, IMO. Could it be a second home for you that they are house sitting for? Maybe draw up a list of goals and submit to the buying and selling a home board or back here, as so many of us are on both boards. Be aware that since they are in MA, if they are on Mass Health, there can be income limitations and you may need to go about this via a trust to avoid their losing Mass Health. We had to do that for a sibling when he inherited a small amount of money from our parents. Many moving pieces.
IP