Have asked my parents if they can help finance the deposit on an IP by using the equity in their home. They are hesitant because of the fear of “losing the home”.
My plan is to buy/renovate/sell.. preferably a block of units.
What is the real danger of such an occurance happening? If, for example, I was to buy a block of units, do a quick renovation and sell them individually for a profit: What is the chance that, in a worse-case-scenario situation, the bank would reposess their home? Could the bank not just repossess one of the units?
My parents want to help me kick start my venture but want some good advice… which I’m sure many of you can give [trigger]. Any suggestions?
It is a possibility that they can lose something – especially in this market and if you have not done this before – I think they are wise to be cautious.
My suggestion is to look for other money partners who would look at the deal carefully and only go with it if they are convinced it is a goer.
Look for cash rich time poor people you know – eg professional people – doctors etc but they will expect a higher interest return on their money.
If you cannot get any one of these people to support you on your deal then it might be a good thing that you don’tinvolve your parents in something they know little about.
If the deal you find is good and financially sound you will have lots of people who want to fund it and get a good return on their cash.
The other suggestion is if you cannot get funds to do a medium sized development, then maybe start on a small house or individual flat.
I know one guy who started buying renovating and selling 1 bedroom flats a few years ago and now he’r in with one other person doing large multi unit block of flats.
So it can be done by starting small. See what you can do with what you can handle and what the bank will support you with.
Ask your parents for a loan for the required deposit rather than going guarantee. This limits your parents risk to only the deposit loan amount.
See if a part colaterial amount can be guaranteed instead of your parents risking their whole house.
The risk is a real and valid concern that your parents have and people do lose houses this way as seen on A Current Affair.
Also sandstone has some good ideas !Using their funds to reno a block of units is high risk. They are right to be concerned.
I suggest you borrow a set amount from them and do a single dwelling first. If you prove you can make money then do it again or do it bigger.
But get some miles up before you tackle an entire block with your parents life savings!
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Just think what could happen, the market drops, you lose your job, the lender forcloses on your property, but there is a shortfall of, say $50,000. The bank will also have a mortgage over the proeprty of your parents. This means they could foreclose on their property too.
Maybe a slim chance of this happening, but you never know.
Terryw
Discover Home Loans
Parramatta
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