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How to Help Your Family Members to Buy their First Home

I found this interesting article on how parents can help their children to buy their first home. There is a way, though, I would suggest  that you consult with the bank or what your partner thinks about it.

SHARED EQUITY: HELPING FAMILY MEMBERS BUY THEIR HOUSE

Written by  | source: http://realtytimes.com

This is an arrangement where you — as investors — own a portion of the property with your children. Under a shared equity arrangement, there generally are two separate entities. You (and your spouse, if applicable) would be considered the owner-investors, and your son and daughter-in-law would be considered the owner-occupants. The four of you would take title to the property. You could own fifty percent, for example, with your children owning the remaining fifty percent. Your children, as owner-occupants, would pay half of the monthly principal, interest, taxes and insurance, as well as half of the estimated fair market rental of the property. You, as owner-investors, would pay half of the monthly costs, would receive the rental income, but would also be able to get some tax benefits if the transaction is properly structured.

In today’s market conditions, where prices are clearly higher than many young couples can afford, shared equity may be the only way to permit our younger generation to get into the home ownership arena.

Here is a general outline of how shared equity works. Although there is no magic formula by which one takes title, often — especially when dealing with family — title is taken on a 50-50 split.

The owner-occupant and the owner-investor each pay 50% of the monthly mortgage costs and taxes. Both parties are entitled to deduct from their income taxes their share of the mortgage interest and the real estate taxes. The owner-occupant pays rent to the owner-investor.

In our example, because your children — as owner-occupants — will only own half of the house, they will have to pay 50 percent of the fair market rental to you as owner-investors. This rental is considered income to an owner-investor, and must be included in your tax return. The main advantage for the owner-investor is that you can depreciate 50% of the property. However, this depreciation is subject to the passive tax rules which Congress enacted with its sweeping tax reform legislation in 1986.

There are a number of legal requirements for qualifying for the shared equity program.

1. The owner-occupant must pay a fair market rental for the portion that he or she does not own.

Perhaps the best way to determine this fair market value is to ask a real estate agent to give you a statement in writing as to what they believe is the fair market rental of the property. With such a document in your files, you should be able to justify the rental if and when the IRS comes knocking at your door to challenge the shared equity concept. A Tax Court opinion has ruled that owner-occupants could pay a somewhat lower rent than fair market rental because the investor will not have any vacancy losses, and because the owner-investor will save the additional costs of hiring a property manager.

A safe harbor would be to deduct 15% from the fair market value, and then your children, as owner-occupants would pay half of that amount to you.

2. There must be an equity sharing agreement. This document, which must be in writing and signed prior to the purchase of the property, should spell out the terms and conditions between the owner-occupant and the owner-investor.

For example, when will this agreement terminate? Who has the right to buy out the other, and under what terms and conditions?

These very serious questions must be resolved, and it is strongly recommended that you do so now while you are still talking with your children. As harsh as it may sound, parents and children often get into major fights, and you do not want to wait until you start having problems in an effort to resolve these important questions.

3. One of the owners must actually occupy the property as his or her principal residence.

Read more at http://realtytimes.com

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San Diego home prices in June rose 19% from a year ago.

San Diego home prices in June rose 19% from a year ago.

 Home price gains in San Diego outpace U.S.

San Diego home prices in June rose 19% from a year ago.

The pace of U.S. home-price increases began to slow by mid-year but not in San Diego County, where values took their largest annual jump in more than eight years, the S&P/Case-Shiller Home Price Index showed on Tuesday.

San Diego home prices in June rose 19 percent from a year ago, which marks its largest year-over-year hike since March 2005. The latest data also shows San Diego is outpacing national home-price growth, which was 12 percent when tallying all 20 areas in the index.

This is often the storyline for supply-constrained counties like San Diego: A limited amount of land means a limited number of homes can be built, which tends to drive up prices, said Michael Lea, a real estate professor at San Diego State University.

“We have more land constraints than most other cities,” Lea added. Similar areas include Los Angeles and San Francisco.

All 20 major metros in the Case-Shiller report showed price gains in June’s report, but fewer cities saw faster growth this month than last month. In this report, six fit that bill. In the previous report, it was 10. Also, more than half of the areas in the index showed weaker month-to-month gains.

For more information on this article from Lily Leung at the Union Tribune:

http://www.utsandiego.com/news/2013/aug/27/san-diego-home-prices-real-estate-values-gains/

 

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Sprindrift Estate In La Jolla Astounds Real Estate Community

La Jolla Oceanfront Estate One Of The Finest Offered In Southern California

La Jolla Masterpiece For Sale For $27,900,000

La Jolla Masterpiece For Sale For $27,900,000

What is the value of “owning” a piece of the luxury beach Real Estate in La Jolla California? An exquite new estate listed on pricey “Sprindrift” in La Jolla is going to show us very soon.   This “one of a kind” property on Sprindrift nestled in the cliffs of La Jolla  is rivaled as an estate like no other. That is why The Biszantz Connection has given it the “Biszantz Best Pick For An Investment Property.” The location is  unparralled combining forever views, up front and center beach living without having the hoards of daytime “beach goers” sharing your front yard with you. This Spindrift Estate encompasses quality and workanship like no other offered on the California Coastline.

La Jolla Homes For Sale

Thoughtful planning of the layout is demonstrated by spacious entertaining areas for large groups while preserving the intimate private bedrooms and family areas that include a bowling alley! Never to be without a guest house, and this La Jolla Estate does not disappoint in offering an adjacent guest home that offers privacy, views and a wonderful experience when visiting the lucky new owner! This amazing estate is listed with Coldwell Banker Residential Brokerage in La Jolla by Shannon Hagan. Any pre qualified buyers can call the office 858-755-0075 for showings.

La Jolla Sophisticated Estate For Sale On Spindrift.

La Jolla Sophisticated Estate For Sale On Spindrift.

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 Del Mar Homes For Sale, Viewable Below.

Del Mar Real Estate.

The properties listed below are the newest available homes for sale in Del Mar. You can view these properties in detail in photo galleries, virtual tours and listing descriptions. If you are interested in viewing any of these properties below, please contact Shannon Biszantz at The Biszantz Connection Shannon@ShannonBiszantz.com or 858-755-0075.

http://www.biszantzconnection.com/communities/del-mar-homes-for-sale/

[idx-listings city=”Del Mar” minprice=”1000000″ minbeds=”3″ maxdom=”200″ statuses=”1″ propertytypes=”336″ orderby=”DateAdded” orderdir=”DESC” count=”50″ showlargerphotos=”true”]

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16236 San Dieguito Road, Suite 4-12,
Rancho Santa Fe, CA 92067

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Office: 858-755-0075




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