Buyer advice for parental purchases

Buying a new apartment / condominium is a complicated process. There are many rules and pitfalls that you must be able to handle. When it is at the same time to let your child (parental purchase) or parents (reversed parental purchase) live in the apartment, the complexity increases considerably.

When the apartment is to be used for letting, the rules in the owner's association and in the rental legislation must be observed. As a landlord, you must charge the correct rent, to avoid problems with the Rent Board, SKAT and any tenants.

Help for buying a house is on your side throughout the entire parenting process. My advice is based on your wishes and your circumstances. I insure you against unnecessary hassle, unforeseen challenges and unforeseen expenses in connection with your parental purchase!

Advice on parental purchases is based on a 360-degree approach. You get expert advice in all aspects of the parent purchase. I advise you both on the purchase and on the operation of the apartment. You also get a thorough overview of your child's situation when the child rents from you. Did you know, for example, that the child may be entitled to housing allowance when he lives for rent with you?

Help for buying a house is your sparring partner and I can advise on all aspects of the parent purchase.

The earlier you get buyer advice the better

To get the best advice, it is a very good idea to involve your buyer's adviser as early as possible in the parent purchase.

Help for buying a house, of course, always advises on the legal content of the deal. As part of the advice, I of course also offer to negotiate with the seller's estate agent. But only if you want to. As a professional negotiator, I know the estate agents' tips and tricks for negotiation. In the end, you usually end up saving money on the purchase if I negotiate for you.

Help for buying a house helps to conclude a deal that meets your interests. It is often of great importance to your apartment purchase that the deal is concluded on the right terms and that your interests and the price are taken into account when the agreement is to be concluded.

When buying an apartment, there are conditions with the home and the association, which the estate agent may not advise you on, but only inform you about. Then it is good to have your own adviser, who knows what importance these matters can have for you as a buyer.

When buying an apartment, it is usually about:

Registered articles of association for the owners' association
Accounts for the owner's association
Liability for hidden faults and defects in the home
Security for the owner's association
Liability for the owner association's debt to 3 people

When the purchase is a parental purchase, you must also keep track of:

Lease law
The tax consequences for you and for the child
The financing

Help for house purchase counseling for parent buyers comes all the way around the parent purchase.

Contact Help for a house purchase today for a no-obligation conversation about how we can help you safely get started with a parent purchase.Get a call by by pressing here.

Parental purchase - what is it?

A transaction is referred to as a parental purchase when parents buy a home and subsequently rent it out to their child/children. There are various advantages for the parents in buying a property to rent for the child. Here can be mentioned:

The child lives safely and cheaply (you can largely decide for yourself what the child has to pay in rent)
Investment, as the home can increase in value
You do not have to pay property value tax (because you do not use the home yourself)
The child can rent out a room and get even cheaper rent (see more below)
The child can receive housing benefit

Parental purchases - what about the tax?

When you, as parents, rent out a home, this is tax-wise equated with being self-employed. You can be taxed according to three different methods: ordinary tax rules, the company scheme or the capital return scheme. Which arrangement is most advantageous in your situation depends on your other financial circumstances.

The tax rules are complicated, and we would therefore advise you to get advice on this. If you already have an accountant, this will easily be able to advise you on what is most advantageous. If you do not have an accountant associated with you, we advise based on that. Regardless of your situation, we will find the most optimal solution for you.

As the lessor of a home for your child, you are free to decide what the child must pay in rent. However, the rules in the tax legislation are that you are taxed on what corresponds to the market rent, regardless of what the child pays in rent. The market rent is an average level of what similar homes in the area cost in rent. We are experts in tenancy law and are happy to help you find the right level for the rent.

If your child pays less than the market rent in rent, the difference is considered a gift. Gifts that exceed the minimum level must be taxed by the child. In 2023, the tax-free gift limit is DKK 71,500 annually per parents. (If the amount exceeds DKK 71,500/143,000, the child is taxed at 15% of the excess amount.)

The child has the option of subletting one or more rooms in the apartment, as this provides a financial advantage for the child and the parents. The child can enter into a subletting agreement where a room / several rooms are rented out to others. It is the child who collects and receives the rent. If the rent for the sublet room/rooms is less than two-thirds of the child's own rent, the child must not be taxed on this income.

Parental purchase - how is the home selected?

Parenting is exciting and complex, as there are many balls in the air that you have to juggle. On the one hand, there is the financial aspect and the risk for you as parents. On the other side, there is the child and their wishes and dreams. In addition, as with any other real estate transaction, there is a whole pile of documents that you have to manage before you buy a property.

Most often, you invest in a condominium, and if you have not bought one before, it is also a challenge to understand the rules.

Before you choose the home, it is important to have an overview of:

What is the price level in the area. Is the home too expensive, too cheap or just right for the price
What is the rent level in the area. Can be a decisive factor in relation to the operating economy.
What the public assessment. There are tax rules that allow the home to be sold to the child for below the public assessment. Therefore, the public assessment can be an important thing to remember if you have to choose between several homes.

I help you to clarify your wishes and needs before you buy a parent-to-own apartment. My experience ensures that you are settled before you sign the purchase agreement. I can help you start the process even before you have looked at the first home.Contact me, for a chat about your options.

What are the rental rules for parent purchases?

Once we have approved the deal on your behalf, we also help draw up a tenancy agreement with your tenant (your child). The lease is not legally binding, but it is a good idea to draw up the lease, as the child can only receive housing benefit if there is a signed lease.

As part of the parent purchase package, help to buy a house offers to draw up the lease and ensure that the rent is set at the right level.

Your child can sublet parts of the apartment on tax-advantaged terms. If the child sublets parts of the flat, it is crucial to have control of the form requirements in relation to the rules of the Tenancy Act. You must ensure that the tenancy agreement is drawn up appropriately, both in relation to your child, but also in relation to you as the owners of the flat.

As part of the parent purchase package, we advise on determining the correct rent level and as an add-on, we are also happy to draw up a sublease contract for you.

Tax rules when selling the home

As parents, you are taxed on any profit you may have from the home, if you have not lived in it yourself. Instead, you can choose to sell the home to your child at a price corresponding to the latest public property assessment of +/- 15%. (If the home has received the most recent property assessment, this range is +/- 20%).

If the child subsequently decides to sell the home, it will not be taxed on the profit, provided that the child has lived in the home during the time the child has owned the home.

The sale of the home to the child is an advantage if you, as parents, want to favor the child financially (popularly speaking, you can talk about a tax-free gift to the child). Selling to the child does not give you, as parents, a financial advantage, as you are selling it at a price that is lower than the latest public property valuation, and therefore somewhat lower than the price you would be able to get for it in a free trade .