Hi guys & girls,
I just came across this forum and at the right time!. First off, the help every one of you provide is absolutely awesome for new comers to the property investing fun and games.
Back to my issue,I just bought a house in a country town as an investment property and its been rented out. All my saved up money went for the deposit + expenses.
My mom wants to sell her property which i always thought was in a superb location ( everything you can imagine is about 400m away!), especially renting out to students since it is close to the city and a uniSA campus. I want to buy this off her as soon as possible but its a case of I haven't been working for long enough to save up the deposit etc but earning more than enough to service the loans.
The house is vacant and I have done some small renos to the place (new paint, front porch etc) and I want to rent it out while I get together the funds to get the mortgage.
Correct me if I am wrong but , since my mom used to live in it, she won't incur CGT because it was her residence?The question is, can I get into some sort of contract with her stating I am going to buy the property and pay her a deposit or something and start renting out the place under my name without her having in incur CGT when she finally sells it to me because it is now earning money???
Also, can anyone recommend a way forward for someone who's in my situation? ( CBA is happy to give me the money provided I come up with 5% deposit + other expenses) There has to be institutions who offer 100% investment loans?
Many thanks in advance guys,
Cheers
Pubs
Pubs, if you mum doesn't need the money at present ie she has minimal debt, talk to her about 'vendor finance' ie she will essentially loan you the value of the house and you pay her back via a documented mortgage – you'll need to get the input from someone who has dealt with vendor finance to structure the deal so that it works for both you and your mum. The rent that you get can form the basis for your repayments.
Thanks for the info PI freely,
I should add some more details to the situation.
The new house my mom bought (where we all currently live) was bought with a bridging loan where she put the house I am interested in on equity. So she is currently paying interest off the mortgage, thus she wants to do this asap too ( the bridging loan was taken out for 1 year)
The new property is under her name and is her primary residence, so if she rents the other one out, she will be liable for capital gains tax ( I think) when she sells it.
Another issue is that she wants the the extra money left over from settling her mortgage to buy an Investment property for herself, which means we need to go through a financial institution.
Is there any way I can rent it out under my name while I have come into to contract that I will buy it off her?Cheers
Pubspubudug,
Sell your existing IP and buy your Mums if its a better place and the figures stack up ! But probably not.Go joint venture with someone who has cash and buy your Mums, a relative or friend maybe.
Your Mum will not need to pay CGT as you suspect if she has just moved to the new house and made it her PPOR.
Get your Mum to loan you the deposit, make some arrangement if she has spare money.
Why doesn't your Mum just sell you half the old house ? that way she has half an investment property without the costs involved in purchasing again.
Hey,
I'm thinking of getting my dad to join me in this venture. He would provide the cash to get me on 80% LVR so I don't get hit with LMI (which is a lot for this property) and I service the loan. This way we can split the rent someway.
This brings on another question, whats the rent value I put in my tax return? My proportion or the entire amount?
My preference is to do this myself to keep it simple.Thanks for your help,
pubspubudug
Is your Dad going to just supply cash up front and you are to have the house in your name or both ?
If it is in your name only, are you to repay him slowly using the rent as help ?
If so the rent will be on your tax return.
If he is half and half with you then 50% rent and costs etc. You can go 20%/80% or any combination.
Also conside joint or tenants in common names on property.Your mum can have 2 main residences with CGT exemption for up to 6months during the cross over period from buying/selling.
You could sign a contract now with your mum with an extended settlement and do your renos etc before completion. Or, if you think values are going to be flat, just leave it in your mum;s name for a while – but watch out if she is going to apply for the pension in the future.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for the replies guys,
If my dad was going to help, he would just give me the money upfront for the deposit and other charges and I will have to get into an agreement with him to pay it off in installments ( from the rent I earn from the property). In this case, would this payment to my dad be considered as a cost of the investment as well? (much like bank interest?) so I can claim it against tax?
Terry – The extended contract is what I had in mind in the first place. She is a fair while off retirement so its not an issue at the moment. This way, the extra rent coming out of this place will help me save up the deposit for the house etc quicker.
Cheers
Pubs
try investigating also a low doc loan as you say you can afford the loan. You might not have thought of this avenue
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