When it comes to affordability, financial profile, and lifestyle, whether an initial purchase or downsizing, everyone has different needs and wants. Some who have the finances will choose a condo or townhome for the luxury, doorman, and amenities, such as a pool, tennis, and security. However, others will choose based on the affordability that a co-op provides. Prices will obviously depend on the building and its infrastructure, financial strength, and whether aone, two or three-plus bedrooms and accompanying bathrooms suit the buyer.
Co-ops can be upwards of $100,000 less, minus most of the amenities provided by a condo or townhome. Sales applications and board approval are mandatory. Whether it is a doorman or gated community for security, pool, tennis, golf, or gym, the level of extras is correlated with the price you will pay. Lately, with the skyrocketing prices of homes, those able to stay locally will instead choose a condo or co-op as a starting point of homeownership or be resigned to a rental.
It can also be more conducive to their lifestyle with or without children. With those types of ownership, closing the door while going on vacation will be more carefree and less worry than owning a single-family home. No worrying about interior issues, frozen pipes, expensive heating bills, leaky ceilings, exterior maintenance, no snow plowing, etc. But today I see the No. 1 factor is affordability being extremely dominant in the decision-making process for a multitude of purchasers. Prices, down payments, and interest rates have caused many to hold back from taking the plunge in buying.
This is a perfect moment in time for parents who are capable and want to happily choose to provide a tax-free gift in order to assist their children. Currently, the IRS code allows parents to provide a tax-free and non-reportable gift of up to $15,000 per year for each child. However, any amount above $15,000 would have to be reported but not taxable and would be against the lifetime total allotted to that individual. Currently, the lifetime tax-free per family is $11,700,000 without paying any estate taxes.
As parents, it is extremely important for you to discuss this with your CPA and certified financial planner to strategize your individual estate plan. Also, make sure in conjunction with your estate planning that your will is up to date. too. I seriously encourage you to consider this option of helping your children in the process as opposed to renting, which is a dead-end street to wealth reduction.
Depending on the income, credit, and debt/income of the buyers, a co-signer or guarantor may be necessary. I just finalized a sale where one person, not related, provided the necessary funds to the purchaser with the approval of management to make the transaction workable. But what’s most important, as they say, “is to not bite off more than you can chew” and go overboard just because you want to be an owner. Becoming more conservative and understanding what trade-offs are in your choices today will put you in a more solid position later on.
Be smart and don’t shoot for the stars if you don’t have the wherewithal and a parachute in the event you get laid off or your business has an issue. Having parents is a wonderful thing, especially when they can offer advice, guide you along and provide financial assistance. But they want the best for you and surely want to keep you from making poor decisions, so listening and having a dialogue will be to everyone’s benefit when you are jumping into the homeownership arena.
Lastly, as we grow older, the decision to downsize or stay where we are and make the necessary upgrades or move to where our children reside becomes an all-important issue that should be considered. Moreover, selling your home because you no longer need so much space and/or the costs involved in upkeep between taxes, heating bills, and maintenance, repairs, etc., or staying local is something else that should be contemplated.
Deciding to purchase or rent is another thing to figure out based on your age, health, and financial situation. Also, maybe an independent or assisted living or unfortunately a nursing home might be in the cards that will have to be considered.
Whether first time buyers in listening to parents’ thoughts and ideas or downsizing, think of your situation carefully and create a reasonable plan at least three to six months in advance to minimize financial errors and the stress that accompanies it.
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades. For a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.
