Buying 2nd property for a child

ross wrote: ↑ I and wife are thinking about buying a cottage type property. Our son and his girlfriend will be leaving there full time. Our son is self employed with a minimal income at this time (he is in the process of starting his own business). His girlfriend is a well paid professional. Since it’s a relatively new relationship to them, they are not ready to buy the house together. Our current primary residence is fully paid off. We will need to get a mortgage for ~$600K for this purchase. Which scenario would you recommend in terms of protecting our investment and future proofing tax implications:
1. Should we just buy this property ourselves?
2. Co-sign son’s mortgage application (without girlfriend) with 1% ownership attributed to us and 99% to our son?

I’m leaning towards option #1.

Thank you!

sircheersa wrote: ↑ Buy it yourself and rent it to them. That way the gf can't try to take half if things don't work out. You can have an agreement where it's "theirs" such that if they ever want to sell and upgrade they can. That's what I plan on doing for my kids. I would just charge less for rent, basically what the unrecoverable cost would be.

ross wrote: ↑ I and wife are thinking about buying a cottage type property. Our son and his girlfriend will be leaving there full time. Our son is self employed with a minimal income at this time (he is in the process of starting his own business). His girlfriend is a well paid professional. Since it’s a relatively new relationship to them, they are not ready to buy the house together. Our current primary residence is fully paid off. We will need to get a mortgage for ~$600K for this purchase. Which scenario would you recommend in terms of protecting our investment and future proofing tax implications:
1. Should we just buy this property ourselves?
2. Co-sign son’s mortgage application (without girlfriend) with 1% ownership attributed to us and 99% to our son?

I’m leaning towards option #1.

Thank you!

RaC1550 wrote: ↑ Out of curiosity, where are you looking to buy?

clydelee2020 wrote: ↑ Buy the house yourselves. Let them be your tenants. Make them sign a lease agreement. This is assuming the girlfriend is okay with all of this. We own a rental property which we are keeping for our girls who are still very young. If one of the girls in 20 years decides to move in with her partner, you can bet they will be renting it from me. If my future son in law has a problem with that then they can buy their own house, or pay 2040 toronto market value rent.

ross wrote: ↑ Thank you everyone for the input.
Sounds like buying it ourselves + renting it to my son + advice from RE lawyer/accountant is the best option here.

DaveTheDude wrote: ↑ Something else to consider is that buying it yourselves create an income tax problem. As your second property it will be subject to capital gains tax. Whereas if your son owned it and resided there it would be tax exempt.

ross wrote: ↑ Yes, capital tax gains is a concern, but the possibility of losing 50% of the property if the they break up I think is more serious in this situation...

DaveTheDude wrote: ↑ You can take back a very large interest free mortgage to cover that. Any breakup means the mortgage gets paid out to you first.

DisneyKruze wrote: ↑ OP, seems you have some doubt whether the relationship will last "forever"...

DaveTheDude wrote: ↑ You can take back a very large interest free mortgage to cover that. Any breakup means the mortgage gets paid out to you first.

NotRobot wrote: ↑ Yes, I was thinking the same thing. Any thoughts on how to deal with property appreciation? Could you just increase the size of the mortgage?

DaveTheDude wrote: ↑ Not sure where the OP is located but in Ontario common-law partners do not have any automatic entitlement to divide assets accumulated during the relationship. You can always draft a cohabitation agreement for greater certainty to protect the accumulated appreciation.

DaveTheDude wrote: ↑ You can take back a very large interest free mortgage to cover that. Any breakup means the mortgage gets paid out to you first.