Buying a house from a family member - looking for advice
My parents have been in a very tight financial situation for many years, and with the recent price jump of their house, my dad has told me that he wants to sell his place when his mortgage comes up for renewal in 3 years.
My wife and I currently own a house in Mississauga (our neighbours just sold for $700k so I'll assume ours is worth about the same as our houses are the same size and we have similar upgrades) with a $140K mortgage on it, and it is currently amortized for 21 years. So my payments are small.
A house in my dads area just sold for about $500K and he currently has a $170K mortgage and owes various credit cards $40k.
My parents live 5 minutes from us right now, and I would really like to keep my parents as close to us as possible, and in a perfect world, I would buy their house and then rent it to them. This way my folks are able to eliminate all of their debt, and have some cash available.
I would want to make the sale as legit as possible, while eliminating as many unnecessary expenses as possible.
What are the things that I need to take into consideration?
I know that the house has to be sold for FMV to avoid capital gains issues, what amount is considered too low? If attempted to buy at $450K would it raise all sorts of red flags?
I'm sure I'll have more questions but I have to start somewhere.
Thanks,
Mike
My wife and I currently own a house in Mississauga (our neighbours just sold for $700k so I'll assume ours is worth about the same as our houses are the same size and we have similar upgrades) with a $140K mortgage on it, and it is currently amortized for 21 years. So my payments are small.
A house in my dads area just sold for about $500K and he currently has a $170K mortgage and owes various credit cards $40k.
My parents live 5 minutes from us right now, and I would really like to keep my parents as close to us as possible, and in a perfect world, I would buy their house and then rent it to them. This way my folks are able to eliminate all of their debt, and have some cash available.
I would want to make the sale as legit as possible, while eliminating as many unnecessary expenses as possible.
What are the things that I need to take into consideration?
I know that the house has to be sold for FMV to avoid capital gains issues, what amount is considered too low? If attempted to buy at $450K would it raise all sorts of red flags?
I'm sure I'll have more questions but I have to start somewhere.
Thanks,
Mike