SELL YOUR HOME TO YOUR KIDS
Do this if:
You want to sell now.
Your kids want to buy now.
Financially, you can afford to sell, either because you've got a replacement property to purchase or can otherwise handle the tax consequences.
Your kids are financially able to buy now.
Note: You can sell to your kids with owner financing. That way, even if they couldn't buy conventionally, you can make it happen. And you can structure the terms to fit your financial needs.
RENT TO YOUR KIDS
Do this if:
You want to retain ownership in the home--either to sell to them later or to continue as a rental.
Your kids can't buy conventionally and you don't want to get involved in owner financing.
It makes financial sense--either because you'd take a big tax hit by selling or because you're looking for a regular stream of income.
Frankly--and I'm a big supporter of lease-options--this doesn't make much sense in this situation. A lease option allows someone to lease now with the option--but not obligation--to buy in the future. If they just want to rent, let them rent. If they want to buy, sell it to them. The only situation in which it would make sense is that they think they might want to buy your home, but they're not sure.
One other thing that may be a problem is that you ask if you should sell your home "to our kids." As in two or more of your children? That technically is possible, but might not be a good idea from a family relations and estate planning standpoint. Would they both/all live in the house? Would one live there while the others lived elsewhere? And what would happen if one wanted to sell and the other(s) didn't? That sort of problem comes up a lot.
You might want to consider placing the house into a trust--either a traditional trust or a land trust. There are a lot of reasons--too long to go into here--about why that could make more sense for you and your children.
So, the first thing you have to do is determine what your goals are and what your kids' wishes are.
Once that's clear, go to a good lawyer--preferably one with estate-planning experience--and discuss those goals with him/her and come up with the best way to handle the situation.
Hope that helps.
The majority of parents who rent to their kids end up letting them slide on the timeliness of the payment and once that happens, then a pattern develops.
Keep the peace with your kids, sell the home and let someone else worry about whether they make the mortgage payment. It will also help the kids if they realize they are accountable to someone other than you!
Here's to happy families!
Becky Overall, Broker
Prudential Real Estate Professionals
licensed in the state of Oregon
Selling the American Dream since 1992
First, would your kids qualify for a decent home loan? If so, with rates low and probably heading higher it would be best for them to get their own loan today.
Second, how long have you lived in your home? Currently, if you have lived in your home two of the last five years you will probably get to take any calital gains tax free on sale. Also, keep in mind that even if you've lived there forever and figure you can rent the home for up to three years and still meet the two of five requirement the tax law could change before you get to realize the tax savings. You just never know these days.
Third, do you still owe money on the home? This question is important becasue if you see the home on contract you could have the note called as "due on sale". This doesn't happen opften but it can and you need to know the risks. To alleviate this a lease option works but sooner or later the kids have to buy anyway, right? If so, why not sell it to them now when rates are low so they can buy it.
As I said, I can't offer advide but hopefully this info helps.
Both You and your children will need to 1st define your overall objectives. I believe for the short and the long run, this can only be done by 1st seeking credible advice regarding Tax implications. (advantages/disadvantages)
At todays market prices, if I were your child and I could afford & qualify to Buy it, I would certainly want to lean in that direction.
IF I were you, I would desire my child to be able to actually qualify and i would also want them to have a legitimate "Vested interest" in the property.
The terms would be based on the dynamics of the tax implications...
Hope this helps!
***please feel free to click on the "Thumbs up" button for all answers that are helpful and eventually pick a "Best answer"
With limited information and not knowing your financial back ground, our recommendation is to consult a tax accountant. With any consideration of this nature there will be pro's and con's for both you and your children....it probably best to weigh all factors with accuracy.
Mortgage interest rates can't get much lower than they are right now. All other things being equal, that would give your kids a pretty attractive monthly payment.
Best of luck!