- Hey all Im after some advise on behalf of a friend that has me stumped. About ten years ago he and his brother bought an apartment in the city which they moved into. Not long after the brother got a girlfriend and also moved in. Now my friend wants to move out as the ole three is a crowd rings true. The problem is wether he should continue to pay half the mortgage, is it fair that he pays for his brothers and his girlfriends appartment. Of course any profits will be split 50/50 when they sell the appartment. It has me stumped-is it his bad luck that he has moved out and should still pay his half share, or should the other brother make more of a contribution seeing he and his girlfriend are gaining their own apprtment to live in?
My advice is to get the unit valued at todays value. The moving out party will need this value for Capital gains calculations in the future as the property now becomes a rental investment. Find out the going rate of rent for a similar unit in the area and the Staying party must pay half of that amount to the leaving party plus half Body Corporate fees and half Council Rates and of course half of loan payments – You can't have your cake and eat it at the same time.
Jon
Do a valuation on the apartment, no doubt there will be some equity. Pay half of what it is worth now and change titles to his brothers name.
Hello blogs
Actually it's not such a complicated situation. If the two brothers own the apartment 50/50 and both names are on the title and they pay the loan 50/50 then Jons' solution above is spot on.
The brother who is going to live in it will have to pay half the going market rent to his brother as rent for his half of the apartment.
The rest of the arrangements (half of all repairs,water (service charge but not usage),council rates,body corp., insurance etc. etc.) stay the same.
Actually, as the place has been the "leaving brothers" PPOR until now, if he is going to rent somewhere else rather than buy himself another PPOR, he should be able to rent out his half for up to six years without incurring CGT if he sells, I should think.
Cheers
ElkaHi Blogs,
I'm with Jon and Elka on this one.
The "leaving" brother needs to decide if he wants to continue to own half or not.
If yes, then he effectively becomes a landlord, and thus needs to both continue his share of the repayments and charge the "staying" brother rent.
If no, then as Jon and Blueheeler have suggested, then valuations etc and a formal "sale" of his half of the property needs to be completed – ie the "staying" brother buys out the "leaving" brother.
Thanks,
BDM
Thanks for the replies thus far. The latest developments are this-the girl friend that has been living there rent free all this time finds offense at having to contribute to something that isnt going to directly benifit her so they are left with three options-either sell it and split the proceeds, or buy each other out. Does anyone know the implications of them buying each other out i.e will they have topay fullstamp duty etc and if so are there ways around this? Thanks
Too easy, Advise the brother to go find another girl friend, this one is a sinker.
On the other hand the Purchasing partner only has to pay Stamp Duty on half of the total value, or their contract price.
Jon
You must be logged in to reply to this topic. If you don't have an account, you can register here.
