Buying Condo for Father?

Question

Hey all!

Just have a questions that i hope someone has done in the past.

I would like to buy my father a small 1 BR Condo in MI. This would be a cash purchase. I am trying to figure out the best way to do this. I would probably only have him give me the taxes, condo fee and maybe a small reserve for repairs, so what he actually would be giving me will be well below fair market rent.

What are the benefits/disadvantages of me buying it in my name alone?

Am i able to purchase it in his name? It is  around 40k so can i gift that much to him?

Just seeing if anyone out there may have knowledge on how this may affect taxes for me or him, he will also be collecting Social Security in the next year and someone mentioned for me to look into that as well but i dont see how a condo in his name could affect his payment at all?

Thanks for the help!!

Tim Barry · Answer

Thanks Aaron,

I would love to do something like the place you listed but unfortunately he is pretty stuck on a certain area.

Another thing i  just came across is the complex does not allow more than 10% rentals and they are at that place. I am going to see if i can convince them to allow it based on the fact it will be my father and not rented to a random person.

I was also thinking of possibly putting both of us on the title? Is that possible and would that allow for homesteaded taxes to be claimed?

Thanks!

Aaron Montague · Answer

Buy it like any other rental property you might purchase.  Charge your father $300/month to cover everything you've listed above.  The rent will be treated like any normal income on your taxes.

Alternatively you can gift your father $14000/year.  He could finance it for less than 14 months (Dec 31 2013 check, Jan 1 2014 check, Jan 1 2015 check) so the finance costs would be quite low.  Then it would be owned free and clear by your father.

My favorite option is to buy a multi family property that your father can live rent free and possibly make some money for you on the side.  A place like this 4 family should bring in about $1875 (3 X $625 via Rentometer.com) for 3 two bedroom apartments.  Your father could live in the other apartment.  No condo fee to boot.

With $40,000+ in cash available, buy the complex, not the condo :)