Grandfather want to sell beach house

12 Replies

BP,

Not exactly an investing question, but this is my go-to place for real estate questions, hope you all can help. 

My grandfather (80 yrs old) is realizing he's a little tight on money. As a result, he's considering selling his beach house (more of a 1988 double-wide). It's worth somewhere in the range of 180-200k. My mom and her 2 sisters would like to keep the house in the family and are considering buying the house from my grandfather. I'm concerned about the capital gains taxes that he would be hit with. Is there any other option that will provide my grandfather the 180k he wants and keep the property in the family? (Seller financing isn't an option because he doesn't feel comfortable with his daughters owing him that amount of money)

Thanks

Does he live in the house or is this a second home? If he lives in it, then possibly can qualify for the exclusion under IRC Section 121. 

probably not. Not sure it makes a difference but he inherited the land about 15 years ago and then bought the double-wide that was on the land around the same time. 

Originally posted by @Gregory Schwartz :

BP,

Not exactly an investing question, but this is my go-to place for real estate questions, hope you all can help. 

My grandfather (80 yrs old) is realizing he's a little tight on money. As a result, he's considering selling his beach house (more of a 1988 double-wide). It's worth somewhere in the range of 180-200k. My mom and her 2 sisters would like to keep the house in the family and are considering buying the house from my grandfather. I'm concerned about the capital gains taxes that he would be hit with. Is there any other option that will provide my grandfather the 180k he wants and keep the property in the family? (Seller financing isn't an option because he doesn't feel comfortable with his daughters owing him that amount of money)

Thanks

Get a cash out loan on the house. That way he will have to pay 0 tax and your mom gets the stepped up basis when he passes away. 

@Gregory Schwartz , Mom and the Sisters could simply gift him money each year up to the federal tax free limits.  And he could live on that.  Willing it to them upon death and the tax would go away with the step up in basis.  Certainly a solution that has the potential for much more family drama.  But one that keeps taxes at bay.  Helps him make ends meet.  and guarantees that mom and the aunts get the property.

@Gregory Schwartz - no problem. I would add that Mom and the aunties should qualify for the loan on their own and not name your grandfather on the mortgage if possible.

The remaining 20% could be gifted as well as a down payment or gifted over time (possibly held as a 2nd lien (?)), or your grandfather keeps the 20% share.

Since this is a 2nd home try to avoid commercial loans that some larger banks will try to push on you. They should be able to get a conventional loan with a low interest rate.

Alternatively, how would your grandfather like to be a AirBNB / VRBO landlord ;)?