Parents want to help with the financing of their condominium -- what's the best way?

My parents own a rented apartment, the value is probably around 100,000 euros. They want to support us with this apartment in financing the construction of our house. My question now is how to proceed best so that as little money as possible is "lost along the way," e.g., on taxes, notary fees...

Options that come to mind:
- My parents sell the apartment and give us the money
- My parents gift us the apartment and we sell it
- My parents keep the apartment and give us the rent monthly
- My parents gift us the apartment, we keep it and use the rent for financing
...

Or are there better options?

Thank you very much!

You could also mortgage the apartment. With that, you would then have "equity." Rental income from one apartment as financing eligibility is something a bank will hardly agree to. If you do get the financing this way, you can of course stretch the financing with the rental income.

The simplest and cheapest method is, of course, the third one. However, then you are all the more dependent on them because this source of income can disappear at any time. First gifting in order to then sell is not really smart. Better to sell immediately and simply hand over the money.

Hello tinct,

basically everything is possible, there is another (additional) option, namely the rental "crosswise". Then you would be the owners of the apartment and the parents owners of the house, which they would rent to you.

This should be discussed with the tax advisor to see if it is worthwhile - if that is even an option to consider.

Regarding the above-mentioned solutions, I would consider whether a) the sale of the apartment is even desired and b) currently sensible.

Best regards
Dirk Grafe

The variants considered based on the costs that may arise (without claim to completeness):

1. Notary fees and land registry entry (as well as broker fees) are incurred. However, it may be the case that these are completely borne by the buyer. How long have your parents owned the apartment? To my knowledge, a "speculation tax" applies to non-owner-occupied properties if the apartment has not been owned by your parents for a certain period of time (consult a tax advisor for this – I am also not entirely sure).

2. Notary fees and land registry entry are incurred for the gift. For the subsequent sale, see above. "Speculation tax" definitely applies – unless there are special cases such as "gifts within the family are excluded" --> tax advisor.

In both cases, pay attention to whether gift tax may apply (the thresholds from parents to children are significantly higher, but perhaps you have already received some amounts in the past) --> tax advisor.

3. + 4. Rental income must be taxed (whoever has the higher tax rate). In addition, there is always the risk of encountering problem tenants or eventually a backlog of investments that will incur additional costs. Furthermore – apartments are usually part of an owners' association (multi-party rental building). If the owners' meeting decides (even against your vote) that, for example, the roof needs to be redone, you are involved.

Are there other children in the family – it would be unfortunate if this causes disputes later because one party feels disadvantaged.

Personally, I think if your parents have no problems with it, they should consider selling – unless the apartment is in Munich ;). But you should really discuss this topic calmly with a tax advisor.

Unfortunately, I am only now getting around to thanking you for your helpful answers. I will definitely talk to a tax advisor and the banker handling the construction financing to see what is ultimately the most affordable and the easiest.