Buy an apartment for the parents?

Hello dear community,

we (35, 37, children 2 & 5) have been living since 2012 in the newly built owner-occupied house at that time. If it matters: the value is about €450,000 with an outstanding mortgage currently of about €220,000. The monthly installment is about €1,600, our family net income monthly between €6,500 and €7,000. Our jobs and incomes are secure (civil servant and employee in public service).

My parents (65 & 70) live 450 km away in their own home (value about €70,000), but would like to move close to us in an age-appropriate way. Now there is a new construction project with age-appropriate condominiums in the neighboring town. These are offered for purchase at about €300,000 or for rent at €850 cold rent. They only want and can rent.

We have now considered having a financing calculation done for the purchase. However, we would not want/could not provide any equity except for the incidental purchase costs. The installment, on the other hand, could be higher than €850, even if this would not be asked from them as rent but would be borne by ourselves.

The idea is primarily that my parents can spend their retirement nicely and securely without fear of termination due to personal use when they give up their own home. And in addition, it would be a kind of additional retirement provision for us if we later owned the condominiums.

What do you think about these considerations? Or even better, what do banks say about such constructions?

Thank you very much in advance.

Good evening Danii,

the idea is not bad. With your income, such financing fits in without any problem.

a few notes:
if the parents move in there, the tax office will see it as renting. That means even if you don’t charge them rent, or charge less.
You are allowed to be up to 20% below the rent index. The tax office will set this as minimum rent (even if you "internally" charge less).

Therefore, it would make sense here:
to finance as much as possible (since the interest is offset against the rental income = tax-reducing effect).
Another depreciation possibility is the AFA with 2% on the apartment value (excluding land, i.e. that will be deducted from the 300,000€).

that means it would probably make sense to even finance the additional purchase costs. To get better conditions, you would offer the bank an "additional security" on your home!
This way you would have more to "depreciate" and better conditions if, for example, you register 100,000 € as additional security on the home, or if you have already paid off a lot, you assign part of the mortgage.
This would also have the nice side effect that you can keep part of the money as a reserve in case something happens.

So if 850 EUR is common as rent, that would be 10,200 EUR per year, 80% = 8,160 EUR would be a plus.
the interest + depreciation as minus... most likely there will still be a profit for the tax office in the end, but it shouldn’t be too large.

have you already had an offer calculated? At which bank is the house financing running?

This is a great model. Two friends immediately come to mind who acted this way. It fits socially and financially alike. As writes: the rent must be in a certain ratio to the local customary rent for tax advantages.

Thank you for your assessment and the explanations.

No, there is not yet a financing offer. Our loan is through the Ing-Diba.

Thank you for your assessment and the explanations.

No, there is not yet a financing offer. Our loan is with Ing-Diba.

With ING, unfortunately, it does not work to take out a loan completely for the new apartment plus provide additional collateral.
For example, you would have to take out €100,000 on the existing house, and the rest on the new apartment.
Two installments, but with low interest rates, as opposed to financing the entire purchase price through the condo.
(ING finances a maximum of the purchase price, but 100% financing is relatively expensive with them... better if you get under 95% or even lower).

Or through other banks, but it depends on the appraisal of your house. (Here the tax aspect applies again!)

The member could help you, but is banned

I would buy