Am I getting a fair deal on apartment with parents?

Billy Johnson

Hi

My parents suggested investing in an apartment with myself and my girlfriend. They were going to buy 40% with cash upfront and my girlfriend and I were going to take out a mortgage for the other 60%. We were planning to sell in 5-10 years and everyone was going to take their proportion of the sale money.

However, the banks will not give myself and my girlfriend a mortgage unless our names and only our names appear on the title deeds. We are going to draw up a separate agreement with my parents granting them their proportion. However, they say that without their names on the deeds, they are taking a higher risk and want us to guarantee a minimum return of whatever they would get had they invested the money in a Rabobank account instead. If the price goes up, however, they would get their full 40% of the sale price.

In addition to this, they get 40% of the rent from our spare room and parking space. Their 40% is now worth €228,000 and the rent would be about €52,000 over 10 years (which is a 23% return over 10 years).

Do people think we're getting a fair deal or would we carry too much of the risk if property prices fall?

Thanks,
Billy

Bluehair

Sounds like a recipe for disaster.

What happens if you and your girlfriend break up? She can legally claim her full half when the property is sold. What happens if you can't/don't rent out the spare room or even those odd months between tenants? Do you still have to fork over 40% of what would have been paid? Same with the car parking space.. What happens if one of you get a car? Are you now paying your parents rent on your own car parking space? And as you say what happens in the event of a downturn, are your parents prepared to share that risk?

Do you really need to be buying a property worth well over a half a million anyway?

Lump

That's what I thought. I think your first house on the property ladder should be something a little cheaper.

John

RainyDay

Very messy - Have you looked into the stamp duty issues? the tax issues? It sounds like your folks are using you, tbh. It's very easy for families to fall out over money.

Billy Johnson

Bluehair wrote:

Sounds like a recipe for disaster.

What happens if you and your girlfriend break up? She can legally claim her full half when the property is sold. What happens if you can't/don't rent out the spare room or even those odd months between tenants? Do you still have to fork over 40% of what would have been paid? Same with the car parking space.. What happens if one of you get a car? Are you now paying your parents rent on your own car parking space? And as you say what happens in the event of a downturn, are your parents prepared to share that risk?

Do you really need to be buying a property worth well over a half a million anyway?

Thanks for the replies.

We'll be making legal provisions in case of a a breakup and don't have to pay rent if there's no tenant. Neither of us know or want to know how to drive so we won't be getting a car!

The only thing we're worried about is the risk of a downturn. Not only are my parents not prepared to share our risk, but we have to cover theirs. We're aware the property is pricey, but it's in a fantastic location and we both are making good money.

Bluehair

Billy Johnson wrote:

We'll be making legal provisions in case of a a breakup

I'm no solicitor but be real careful about this, I'd be very surprised if you can create a contract in this manner where the two of you alone are on the deeds and yet your parents are seen to have an interest, in fact the bank will probably require a letter from them stating they will have no interest in the property.

Billy Johnson wrote:

and don't have to pay rent if there's no tenant.

What if this goes on for a few months? What if you both get to like not having to share your half-mil home with a stranger?

Billy Johnson wrote:

Neither of us know or want to know how to drive so we won't be getting a car!

Your timeframe of 5-10 years is a helluva long time to commit to not learning to drive or own a car! Is this realistic?

Billy Johnson wrote:

The only thing we're worried about is the risk of a downturn. Not only are my parents not prepared to share our risk, but we have to cover theirs.

Say there is a downturn, are your parents really going to hold you to this aggreement? If they do can't you see the potential problems this would cause? If they don't can't you see the potential problems this will cause? It's a no-win scenario in my honest opinion.

Billy Johnson wrote:

We're aware the property is pricey, but it's in a fantastic location and we both are making good money.

Don't let the location blind you to your own fiancial reality. Please forgive the bluntness; you can't afford this property.

gamer

u,d be better off buying house,apartmnt,maintenace fees,1000 per annum,minimum,and ur paying 30k at least for parking space,to borrow 30k off bank ur paying at least,60k back JUST for 1 parking space?,u can use rent aroom scheme,no tax on 7k,or 7500 rental income per year, check on revenue.ie .but its better to buy something than pay 700e a month rent,under 317k,no stamp duty for first time buyers.

flogen

I personally would be much happier to sacrifice the great location for a better situation financially.

As has been pointed out, things can get very messy in this situation.
If you both have good jobs you can still afford a good place without all these strings, maybe even if you have to save for another X amount of months to get your deposit sorted.
Unless you are extremely well off and can buy the place outright with your own money you shouldn't expect to move into a top-notch place from the start. That's not to say you have to take a kip, just lower your standards, it's not called the property ladder for no reason

dunkamania

The deal your parents are offering is fair,but I dont think you should take it because of potential messiness.

gamer

property in dublin going up 10percent ,each year,,if thats the only way u can get mortgage,then go 4 it,its better to get house though, houses in private estates in blanchardstown,second hand,perfect nick,with garden, 240k,or 245, dont get 1 near corduff, or right next to council estate.houses near shoppping centre are going 4 240k or even 220.when u buy house u get parking space free.