Renovation loan for parental home

Better to buy at a fair price and renovate. Possibly grant a right of residence if purchased significantly below market value. They are parents, OK, but even they cannot want you to go into debt without having anything to show for it.

Correct. Alternatively, I could imagine that the loan is "passed on" to the parents (if the parents do not want to take it out directly with the bank) and the repayment is directly offset against the cold rent. For security, possibly also secured in the land register.

Correct.

Alternatively, I could also imagine that the loan is "passed on" to the parents (if the parents do not want to take it out directly from the bank) and the repayment is offset directly against the cold rent. For security, possibly also secured in the land register.

Yes, we had something like that recently. The children were nearly desperate because that also failed. The parents did not want to take on any loans but wanted to live.

I can understand both. In the end, the children are moving away after all.

First of all, many thanks for the many responses!

The hints on typical life risks such as divorce, need for care etc. were really good. We probably need to think two or three steps further in financing.

It's strange: In our multi-generational family house, we agree that we want to renovate and where it is especially urgent. And now more and more construction sites are opening up...

I look forward to further suggestions!

If applicable, another aspect could also come into play, suggesting that the property owner pays the construction invoices and takes out a loan. For tax purposes, when renting to relatives, expenses are deductible as advertising costs if the rental income amounts to at least 2/3 of the local customary rent.
If the parents take out the loan and the children pay at least 2/3 of the local customary rent, depreciation and interest costs are fully deductible.
It should therefore be examined to what extent
1. the parents pay taxes at all
2. interest costs + depreciation > 2/3 of the local customary rent.

If applicable, a joint appointment with a tax advisor should be arranged.
These are actually topics that often arise with him, so that he can provide some advice both tax-wise and legally.

At the bank, it is usually noted what the loan is for. This would also be the case with the renovation of the property. This should then also be taken into account in the event of potential care for the parents, meaning the loan for value increase x on the property is considered.

I would
- transfer the house from the parents to the child (gift)
- register a right of residence or usufruct right for the parents for their apartment
- possibly pay a certain amount to the parents (a kind of rent, care payment, compensation for the gift) which must be included in the gift contract
- then only start the loan and renovation.

The advantage is that in case of emergency, the state cannot include the final value achieved through the loan. A compensation payment in the gift contract also meets possible claims, although not completely.

You can hardly do it cheaper/better for the next generation. There is still a certain risk, but it is reduced.
It also applies, even if it is a bit morbid, the earlier the gift takes place the better.
One can rely on an inheritance, but due to the high care costs and the expectation that at least one parent will need this care, it would be foolish to act that way considering the monetary value of the property.

Buyout in a small amount does not work. There are no real tricks for this either. Money transfers are dangerous even in cash as the tax office etc. checks very carefully in case of emergency.

You can reduce possible follow-up costs somewhat and make them plannable for the worst case.
But you can no longer exclude them completely, at least not anymore.