Buying a house for a child

[Time2]

We bought our daughter a dental education, ($300k), I want to play catch up with our son, and will probably buy him a house.

He is 29 and living back at home, long story short, He moved home to say good by, was planning to get married to a Canadian and move there, Covid hit, no travel, over time the engagement was called off. He's still home, and I'm enjoying it, but he wants to get out on his own.

I'm telling him it is not the time to buy, interest rates are high and house prices are high. He's doing well, saving well over 50% of his income, I'm telling him stay and keep piling up money. He has looked into apartments and it would be more than $25k a year to be on his own. I tell him hang in a couple more years. That's $50k+ more you will have.

When the time comes, I'm trying to figure out the best way to get him in a house, I could just buy the house and give it to him, I could have him get the mortgage and then we could gift him $17k or $34k a yr to pay his mortgage. I'm sure there are other options.

I'm not willing to entertain, we should not buy him a home. We want to.

 

[Irishgirlyc58]

If I had the money and I could buy the house outright for him without jeopardizing my own financial security that is what I would do.
But I’m not financial expert.

Did you pay your daughter’s tuition for dental school? Or reimburse her after the fact?

 

[tulak]

I can relate to your thinking. I have something similar with DS, even though he’s younger. He’s living with me to save money for a house. He has a good job and saves a lot. Unfortunately we live in a HCOL area where starter homes are 800k+ and decent homes are over a million. It’s not easy to save for a decent downpayment, not to mention dealing with higher interest rates.

Idk how it’ll work out, but I encourage him to be patient and keep saving. When the time comes, I might help out with a down payment, but he’s the one buying the house, so it’s up to him - and his DGF - to figure out the details. Odds are they’ll have a big mortgage, but that’s ok as long as the numbers add up.

I like the idea of the gradual gifting too, but if he’s financially responsible, I would see how he wants to handle buying a house and then see how you can help.

 

[Jerry1]

We had a similar situation. Paid for one daughters education and the other daughter we bought a house. The times were definitely different. We bought the house as a foreclosure during the 2008 housing crisis. We got it cheap and put some money into it and came pretty close to what we spent on the other daughters education.

As for now, there's always arguments to be made that this is or isn't the right time to buy a house. I would start looking and see if you can find a deal. It will help both of you firm up your thoughts on what type of house and the location you're interested in.

The finances were pretty straight forward. When we bought the house we put it all three of us on the title (DW, DD and me). She was married but we were being protective of a divorce situation. Fast forward about 10 years and we signed over the house (son-in-law deserves anything he gets at this point if he were to divorce. ). The gift was the basis in the house so me and DW each gave DD and SIL the maximum gift and stayed under the gift filing requirements. You could easily do a quit claim or something to gift the house over however many years is takes.

Wishing you well. It's an exciting thing to do for your son.

 

[Aerides]

Personally I don't think waiting for better rates/prices is realistic. Rates went up, things slowed for a bit, but prices continue to climb in hot markets.
It's still a supply/demand issue.

 

[Sunset]

I see nothing wrong with your intent, but where would he buy ?

 

[rodi]

Disagree with the supply and demand thing for real estate... It's location location location.

A house in 29 Palms is a lot cheaper than a house down the road in Palm Springs. Even if the same number of similar tract homes are available in each area.

 

[anothercog]

That's very generous of you. I would like to do the same but given where we live, that would require me to work way too long. At best $300k could be a down payment on a townhome.

I would suggest providing him the downpayment. Ideally he could get a roommate to help offset some of the costs and you could gift him the rest annually. if he is unable to obtain a mortgage on his own you could also co-sign.

 

[Time2]

If I had the money and I could buy the house outright for him without jeopardizing my own financial security that is what I would do.
But I’m not financial expert.

Did you pay your daughter’s tuition for dental school? Or reimburse her after the fact?

Tuition was about $60k a year, paid twice a year. She was married while in dental school, so the wife and I each gifted $15k to her and then to her husband to pay the tuition. During her first year at one presentation, it was told that 11% of the students had not taken out loans for tuition.
She's been practicing for a year now.

 

[Time2]

I see nothing wrong with your intent, but where would he buy ?

Hopefully fairly close as his job is only about 3 maybe for miles from where he is at now.

 

[MarieIG]

Since he is already saving, why don't you contribute to his "downpayment" fund.

 

[SJhawkins]

Does $300k buy a house in your area or is that a little down payment, just curious?

Around here $300k would almost get you something decent. $300k + $150k mortgage would make for fine place.

I think it's a great idea, sure your daughter would understand, that would be my only sticking point to vet out someway.

 

[skyking1]

I'd pick the route that was the least complicated for his taxes.
The ongoing mortgage gift would be the lowest bracket event, if he can swing the down.

 

[captain3d]

Tell him there is $300k available and let him decide if he wants it and what he wants to do with it.

 

[DrRoy]

I would involve him in the buying decision (picking the house). I would not want someone else choosing where I was going to live.

 

[racy]

We bought a small house for our 'challenged' DS and daughter-in-law two years ago. We own it and pay the taxes; they live in it rent free. We let our other, successful, DS know what we were doing which he understood and agreed to. We bought it with my IRA money. This bumped up our income so we're paying IRMAA this year.

 

[Time2]

Does $300k buy a house in your area or is that a little down payment, just curious?

Around here $300k would almost get you something decent. $300k + $150k mortgage would make for fine place.

I think it's a great idea, sure your daughter would understand, that would be my only sticking point to vet out someway.

We're in NW Florida, $300K will get you a 3bd, 2bth house with a 2 car garage.
My daughter is highly motivated, she understands she is very lucky and is grateful to be earning a high income with zero student debt. We also bought* her and her husband a repo'ed fixer upper house and gave them a two year mortgage. They fixed it up in a year and got it remortgaged. She won't have any problem.


" The house was an FHA repo. Through no problem of the kids, the closing was delayed a couple times, then the closing agency merged with another and the stopped closings until they got that all in order. So I stepped in bought the house and gave them a mortgage. They ended up with having two appraisals because of the delay, the second one was $40k higher, just while waiting to close, (hot market anyone?) She was still in dental school 400 miles away, but they just went house looking and saw this repo on a canal out to the Gulf of Mexico. The lost in the first round of bidding, then the guy that won somehow fell through and they got to bid a second time.

 

[Time2]

I would involve him in the buying decision (picking the house). I would not want someone else choosing where I was going to live.

Absolutely, it is his house, his decision.



He's pretty methodical, when he was thinking about moving to an apartment, he did a spreadsheet on two different apartments adding up all the costs, to see what it would cost him per year to move out. He traded a little independence for the $25k a year it would have cost him to move out.

 

[Kings over Queens]

So many variables.

First, I disagree about delaying. You can't time a market, and a homes primary purpose is to provide shelter.

Buy the house in your name, let him live their rent free, or at a minimal rent that you can gift back if needed to satisfy gift tax questions.

Establish a trust that buys the house so that it's out of your estate, and no longer a personal liability exposure.

He buys the house, you extend a mortgage and gift it over the next few years, like you mentioned.

I don't like trying to solve the "best" solution because that's a moving target grounded in your personal situation. Don't let good be the enemy of perfect.

Personally, I like the ideas of trusts as a shelter on the chance my kids marry "poorly" and avoiding the issues that come up if/when a marriage goes south. We're a few years away from it, but its on my mind.

 

[Teacher Terry]

I am a big believer in making things equal for kids so giving your son 300k like you did your daughter makes sense to me.

 

[Dash man]

We bought a $312k townhome for our younger son and his family during the height of Covid, back in March 2020, closed in June.
We keep the house in our name, but each of our sons will get the house they live in after we pass with the stepped up basis.
It’s increased about $130k in value in three years.

 

[tulak]

We bought a $312k townhome for our younger son and his family during the height of Covid, back in March 2020, closed in June.
We keep the house in our name, but each of our sons will get the house they live in after we pass with the stepped up basis.
It’s increased about $130k in value in three years.

What if they want to move before you pass?

 

[Dash man]

What if they want to move before you pass?

I told them they can move if they choose and we’ll deal with selling the home. If they choose to move to a different home in the area, the sales money can be used towards that. If they choose to leave the area, we haven’t discussed. But they like it here in PA. They were getting crushed by rising rents in Renton, WA, and couldn’t imagine being able to afford a home in the Seattle area. They also like being near family while raising our grandson. Now that DDIL’s mother has moved in with them, they like us being able to help get her to appointments if needed. Of course, we love having them nearby and watching our grandson grow up and he loves his cousins.

 

[tulak]

I told them they can move if they choose and we’ll deal with selling the home. If they choose to move to a different home in the area, the sales money can be used towards that. If they choose to leave the area, we haven’t discussed. But they like it here in PA. They were getting crushed by rising rents in Renton, WA, and couldn’t imagine being able to afford a home in the Seattle area. They also like being near family while raising our grandson. Now that DDIL’s mother has moved in with them, they like us being able to help get her to appointments if needed. Of course, we love having them nearby and watching our grandson grow up and he loves his cousins.

That’s great. Thank you for sharing.

 

[MarieIG]

We're in NW Florida, $300K will get you a 3bd, 2bth house with a 2 car garage.
My daughter is highly motivated, she understands she is very lucky and is grateful to be earning a high income with zero student debt. We also bought* her and her husband a repo'ed fixer upper house and gave them a two year mortgage. They fixed it up in a year and got it remortgaged. She won't have any problem.


" The house was an FHA repo. Through no problem of the kids, the closing was delayed a couple times, then the closing agency merged with another and the stopped closings until they got that all in order. So I stepped in bought the house and gave them a mortgage. They ended up with having two appraisals because of the delay, the second one was $40k higher, just while waiting to close, (hot market anyone?) She was still in dental school 400 miles away, but they just went house looking and saw this repo on a canal out to the Gulf of Mexico. The lost in the first round of bidding, then the guy that won somehow fell through and they got to bid a second time.

I remember that. The only issue I have is: Let your daughter and son-in-law pick up the tab when you go out to dinner from now on! (You've more than earned it, they can afford it thanks to you and your DW, and it's good for them to give as well as to receive.)