we are considering buying a co-op apartment for our adult child. they would pay us a monthly rent (at market rent prices) what are the legal and tax issues for this proposal? would we put the shares in our name? in our child's name? in all of our names? etc. any help or suggestions would be appreciated!
Buying for adult child
- Thread starter elmtree
- Start date
Due to the MANY variables in this, I suggest that you make sure you speak directly to a real estate lawyer (and probably an accountant) as you will want to maximize the personal residence exemption for your child as well as protect your investment without triggering tax. A well written Joint Venture will probably end up being the best choice.
You mentioned a Co-Op apartment, you will want to ensure you are OK with ownership in a Co-op vs a stand-alone condo as well. Each co-op has their own set of operational rules which MAY restrict future use and future disposition options.
You mentioned a Co-Op apartment, you will want to ensure you are OK with ownership in a Co-op vs a stand-alone condo as well. Each co-op has their own set of operational rules which MAY restrict future use and future disposition options.
Definitely speak to an Accountant who specializes in small business and real estate. Here's who I use: http://cccpa.ca/contact/
It's a great idea and the answer depends on your intentions with the property, will your child inherit the property? Share structure will be key and estate planning (e.g. life insurance) will be key to ensure you pass on the property to your child while minimizing taxes owing.
And super cool you are involving your child in your investments!
Best of luck,
Erwin
It's a great idea and the answer depends on your intentions with the property, will your child inherit the property? Share structure will be key and estate planning (e.g. life insurance) will be key to ensure you pass on the property to your child while minimizing taxes owing.
And super cool you are involving your child in your investments!
Best of luck,
Erwin
What is the goal here ? Build equity for the child ? Get him (or her?) out of the house ? Is child employed and has income ? Can child qualify for a mortgage ?
Ideally the child owns the property and the mortgage. You help with downpayment, via a gift. No taxes payable on gifts. Just wire the money, or give him/her a cheque. You could co-qualify for the mortgage, if child cannot by him/herself. Ideally the mortgage is not in your name though.
Do you want to be a landlord ? Are you willing to evict child if rent is unpaid, as that is what you must do on occasion as a landlord. As such, assess this likelihood.
The bigger picture in your post is missing and would help for better insight by forum members.
Ideally the child owns the property and the mortgage. You help with downpayment, via a gift. No taxes payable on gifts. Just wire the money, or give him/her a cheque. You could co-qualify for the mortgage, if child cannot by him/herself. Ideally the mortgage is not in your name though.
Do you want to be a landlord ? Are you willing to evict child if rent is unpaid, as that is what you must do on occasion as a landlord. As such, assess this likelihood.
The bigger picture in your post is missing and would help for better insight by forum members.
Good points.
I am considering helping my nephew with a rent to own (which would absolutely not involve a JV partner, due to the increased risk), and the first thing I said to him was, "If you don't pay rent, I won't hesitate to kick you out on your arse."
I would do it too (and he knows it); and there is no doubt that it would damage our relationship for a while at least. This would be much more difficult to do if he was my son.
I am considering helping my nephew with a rent to own (which would absolutely not involve a JV partner, due to the increased risk), and the first thing I said to him was, "If you don't pay rent, I won't hesitate to kick you out on your arse."
I would do it too (and he knows it); and there is no doubt that it would damage our relationship for a while at least. This would be much more difficult to do if he was my son.