In this blog, we have already explained to you how to sell a house to your child as cheaply as possible. But what about if you want to sell a rental property to your child? We explain it to you simply here.
If you have a property either residential or commercial that is rented out to third parties (i.e., not to your child who wants to buy it), then things get interesting. If that property is transferred at the notary to your child or children in rented condition (i.e. with the sitting tenants in it), then you may use as the purchase price the assessed value in rented condition. We explain how this works with a simple example, because it is important that you get this right.
Example selling rental property to child
Piet and Marie have a small apartment in Amsterdam that they rent out to expats for €900 a month. They favor their child Bas buying over this investment home. Bas will not buy into the property himself and the lease with the current tenants will not be terminated. Current tenants will continue to rent the property as usual.
Similar homes are offered in non-rented condition in the same apartment complex for approx. €300,000 sold. The WOZ value is €275,000.
Pete and Marie would prefer that their son Bas pay as little money as possible for the investment home. Pete and Marie have a validated appraisal report prepared on the rental property. Fortunately, the assessed value of the house in rental condition turned out to be only €150,000. Pete and Marie may now sell the investment home to their son Bas for €150,000.
What should you pay attention to when selling a rental property to your child?
-The notary will ask for a recent validated appraisal report. Note it must be a validated appraisal report so.
-No validated report can be made of room rental properties
-From 1 property in which only structurally multiple residential units have been made, this also cannot be validated appraised. For example, we see this a lot with an upstairs apartment where a small apartment has been created on the 1st and 2nd floors, even though those living units are not cadastrically split.
-If your child rents the property and then wants to buy it, your child should simply pay the market value free of rent and use rights (i.e., the market value in rented condition does not apply).
-Don’t make a sham arrangement by quickly renting out a home to an acquaintance to depress the value for tax purposes and shortly thereafter having your child live in that home himself. The IRS pokes through this.
-Note that the transfer tax is a lot higher at 10.4% starting in 2023.
-Although this article has been compiled with the utmost care, always make sure that before you sell the a rental property to your child and before you start incurring expenses, you get written confirmation from your notary that you may indeed sell and transfer the property to your child or children for its appraised value in rental condition. In this, always take the safe bet.
Rental state valuation report
Should you need an appraisal report in rental condition, we can help you well in region:
Aalsmeer, Amstelveen, Amsterdam, Badhoevedorp, Bakkum, Beverwijk, Bloemendaal, Castricum, Cruquius, De Kwakel, Driehuis, Haarlem, Halfweg, Heemstede, Hillegom, Hoofddorp, IJmuiden, Koog aan de Zaan, Krommenie, Lisse, Nieuw-Vennep, Overveen, Santpoort-Noord, Santpoort-Zuid, Spaarndam, Uitgeest, Velserbroek, Vijfhuizen, Vogelenzang, Westzaan, Wormer, Wormerveer, Zaandam, Zaandijk, Zandvoort and Zwanenburg.
You can request a rental appraisal report here.