# Buying an investment property jointly with my son



## Mr Eastwood (23 Jan 2014)

My son and I are buying a house jointly for investment. Ownership will be split 2 thirds/1third. I will be paying cash for my 2 thirds and my son will be getting a mortgage for most of his third. Because my sons wage is low he will only get a mortgage if it is done in joint names. 
This raises 2 questions, one legal and the other is tax/financial related, but I realize I am not allowed ask the same question in two forums
1/ Is it legally possible to have a house jointly owned and split as described above.  (I am guessing that will not be a problem)
2/ When we receive income from the property will the tax man tax us in accordance with our 2 thirds/1 third ownership arrangements. Even though it will be a joint mortgage my son will be paying the entire mortgage. I already am on the 41% tax rate and my son on the 20% rate. 
Any info would be greatly appreciated


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## Nige (23 Jan 2014)

why are you paying the mortgage?  
That will be treated as either:
- evidence that you are the beneficial owner of the full house and taxable on the full rent (less allowable expenses) or
- a gift to your son subject to CAT (if you exceed the threshold).  In this scenario, the rent will be taxed on the 2/3 1/3 ratio.


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## Mr Eastwood (23 Jan 2014)

Thanks for reply Nige. 
Just to clarify, I will not be paying any of the mortgage as I have the cash for my 2 thirds. My son will need a mortgage for most of his third as he does not have the funds, but his income is too low to get a mortgage on his own. He will only get a mortgage if it is done jointly with me


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## Joe_90 (23 Jan 2014)

So he wants to buy a property but can't as he does not have the finances.
You are going to buy 2/3 of an investment property?
Would you invest in property if it were not for your son?
You will be assessed to income tax in 2/3 of the rental profit.
If you choose to gift that income to your son then there is a €3,000 exemption the balance will start to eat into your class A threshold for CAT.


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## Brendan Burgess (23 Jan 2014)

> My son and I are buying a house jointly for investment.



I think you should post your son's financial position in a separate Case Study.

Forget the tax issues. This looks all wrong to me. 

If you help your son to buy a house to live in ,that is fine.

If your son is on a 20% tax band, he should not be borrowing to invest.  Borrowing to buy a house is a different thing, but probably still too risky. 

Your son will have a mortgage on an investment property. If he later wants to buy a home, the existence of the mortgage will prevent it. 

Generally, not a good idea to buy an investment property or 1/3rd of an investment property before you buy your home.


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## Bronte (24 Jan 2014)

Yes you can purchase the property as you being a 2/3 owner and him being a 1/3 owner. I don't see why then it won't be taxed accordingly. So I would just split everything that way. Income in, you 2/3's and costs the same. Your profit will be taxed at close to 50% (tax and prsi and usc etc).

Now the mortage is his alone. Not sure but then he's allowed claim the full 75% of interest against his rental income. It has nothing to do with you. Joe90 (accountant) is that correct? It's unlikely he would pay any tax. 

But this is all very messy. Explain the logic of the investment?

I would want it in writing from revenue that the mortgage will be treated for tax purposes as your son's, which is the intention and reality, but it's necessary to have your name on it for the bank.  Might be better if you were guarantor then I guess, but I think most banks are refusing guarantor's currently.


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## Mr Eastwood (24 Jan 2014)

Thanks Joe 90. Yes I want to invest in the property market also, I am not investing only for my son's sake. I do not intend to gift him my income from the property. The income from his 1/3, of the property we have in mind, should pay his mortage. I do intent to gift him some of the deposit for his 1/3 as he will not get 100% mortage for his 1/3. I realise that money will be subject to CAT


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## Mr Eastwood (24 Jan 2014)

Brendan Burgess said:


> I think you should post your son's financial position in a separate Case Study.
> 
> Forget the tax issues. This looks all wrong to me.
> 
> ...


 
Thanks Brendan,

1/3 of the income from the property we are looking at should pay the mortage on my son's 1/3 share 

I happen to know somebody in one of the main banks and they think he would get a mortgage for investment only, as the return from it would pay the mortage. 

In relation to a future mortage I thought a bank might look at his first property as a source of income rather than a liability
Any further thought welcomed


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## Mr Eastwood (24 Jan 2014)

Bronte said:


> Yes you can purchase the property as you being a 2/3 owner and him being a 1/3 owner. I don't see why then it won't be taxed accordingly. So I would just split everything that way. Income in, you 2/3's and costs the same. Your profit will be taxed at close to 50% (tax and prsi and usc etc).
> 
> Now the mortage is his alone. Not sure but then he's allowed claim the full 75% of interest against his rental income. It has nothing to do with you. Joe90 (accountant) is that correct? It's unlikely he would pay any tax.
> 
> ...


 
Thanks Bronte for the very clear reply.

It does all sound very messy. I have an interest in the property market and was in it for a short while about 20yrs ago. I have a desire to get into in again and my son seems to be keen also, even though he has no hope on his own. I thought the above soultion would fill both of our ambitions. We work well together, he is young and energetic and I am older and more experienced


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## Brendan Burgess (24 Jan 2014)

Mr Eastwood said:


> In relation to a future mortage I thought a bank might look at his first property as a source of income rather than a liability
> Any further thought welcomed




Absolutely not. 

They will see that he has a mortgage and that will reduce the amount he can borrow.

I think that this is not a good move by you.



> I have a desire to get into in again and my son seems to be keen also,  even though he has no hope on his own. I thought the above soultion  would fill both of our ambitions. We work well together, he is young and  energetic and I am older and more experienced



You can afford to take the risk of property investment. He can't and shouldn't. 

If he insists on going ahead, I suggest that you do it all in your sole name so his future borrowing capacity is not restricted. 

You will need to do a binding side agreement which sets out his liabilities and responsibilities.  For example, he gets 33% of the gain or fall in the value of the property. 

This is also very flexible for him. He can cash out whenever he wants as you will pay him the gain he is due. 

In practice though, if the property falls in value, it will be hard for you as the father to call on him to pay his share if he is not earning very much. 

Brendan


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## 44brendan (24 Jan 2014)

I suggest that you are partly viewing this transaction from a tax angle. i.e. As you son is on a low tax rate, assumption is that Revenue will treat his portion of the RI as taxable income and allow him to offset the full 70% of the mortgage interest against this income. Brendan B's post is relevant as this transaction "May" restrict your son's ability to borrow in the future. He will not be a first time buyer, but this advantage is gradually being reduced anyway. Purchase will be as Tenants in Common and apportioned between you accordingly. Mortgage will need to be joint liability as Bank are unlikely to accept you as a guarantor. Apportionment of interest should not be a key issue as you will likely be able to claim a portion being a joint borrower and if needed you can contribute any benefit you get from this towards the mortgage repayments. I suppose the main issue for concern for your son is whether he will require to purchase his own PDH, either solely or jointly in the short to medium term.


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## Mr Eastwood (25 Jan 2014)

Thank you all very much for your contributions, we have been left with plenty to think about. Our spirits have also been dampened a bit

I would like to add a few more comments. In relation to a future mortgage I cannot see my son applying for one in the near term. With money for the deposit he will be getting from me  + some of his mortgage paid in a few years + hopefully some capital appreciation, hopefully he will have built up some equity in 5 or 6 years. Do any of you think these might improve his future mortgage prospects.  Hopefully his career/income will improve also as he finished an engineering degree course last summer. 

As has been mentioned above going guarantor is not acceptable to banks anymore

Would any of you know the current advantages for first time buyers


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## Brendan Burgess (25 Jan 2014)

Mr Eastwood said:


> Would any of you know the current advantages for first time buyers



There is none at present. However, they could be reintroduced at some later stage, so I would stronly recommend that he does not buy an investment property.


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## SarahMc (26 Jan 2014)

I would tend to agree, he is young, just out of college and starting his career. Now is not the time for him to buy an investment property, he might want to head off for a year, go back and do a masters, he might meet someone and want to buy jointly. Tying himself to this investment and the risks and impact on his borrowing capacity at this stage is not wise.


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## RainyDay (26 Jan 2014)

Mr Eastwood said:


> My son will need a mortgage for most of his third as he does not have the funds, but his income is too low to get a mortgage on his own. He will only get a mortgage if it is done jointly with me[/SIZE][/FONT]


Take this a hint.


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## Mr Eastwood (27 Jan 2014)

Thanks very much to everyone for your much valued contributions


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## Bronte (28 Jan 2014)

Mr Eastwood said:


> Would any of you know the current advantages for first time buyers


 

I am very skeptical that the advantages were all they seemed. There used to be a grant/reduction but all that happnened then was that the property price reflected this.

It was suggested to you that you post a new thread as the son, so that advice could be given from that angle. It might be an interesting angle on all of this.

I think it might be a better idea for you to purchase and he to manage it so see if he can handle it.  That would be very educational for him.


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