Hi Parky,

I don’t want to speak out of turn here, but I wondered if there might be “a way around” this. Right here, we could do with the input of @terryw as I am not an accredited adviser. But I can be a catalyst perhaps ….. ;)

What I am thinking is this:-
1. A person’s (couple’s) home is exempt from CGT
2. It CAN be exempt from CGT for up to 6 years after leaving it (and it can be rented out in that time) – on conditions ……
3. One condition to 2. is that another PPOR is not purchased – you can purchase another property, but NOT call it your PPOR as well. You choose which is your PPOR.

Now, there is probably much more to this, and Terryw would be the one to massage the idea, but

“What if….”

What if your parents didn’t declare their CURRENT home as their PPOR, and continued to call the one they left in 2013 as their PPOR until it sold, or until they CHOOSE to change the PPOR nomination? I believe that this might be a LEGAL option (i.e. their choice) – Terry????

What ramifications would/could that have on their NEW PPOR?
Well, maybe they can CHOOSE to not call their new house their PPOR until today or even 2019 if they are keeping the old PPOR! That could mean that there might be some CGT to pay on their current home when they sell it.

Work with the values of each, and the kind of price gains that might have occurred. e.g. if the one they bought in 2013 has been stagnant in value since 2013, get a valuation NOW, and that should “lock in” a value that can help to show any “gain” since 2013 (when considering purchase price).

As I understand it, “YOU CHOOSE” which of your properties will be your PPOR, from what date to what date. This allows some latitude that could work in your parent’s favour.

Do they have any plans to SELL the old PPOR, or the new home? What are the respective growth rates of both properties? Is one in an area where values grow quicker than the other? What are their incomes (both now, and then – 2013)? What is the way forward, given that “PPOR” is a NOMINATION and not designated by where you sleep?

Someone like Terryw could sit down with them and work this through and consider ALL of the details – including, their Income NOW compared to their Income in 2013. That too can have an effect on “which PPOR to choose”.

I’ll happily welcome any comments, even if only to tell me I have it wrong – I hope not, as I didn’t want to get your hopes up, but hey, let’s work it out together. It is an intriguing question !! ;)

Benny

PS By the way, I don’t ask that you share your parent’s Income, etc on here – my comments are simply to get the wheels turning, and to get you asking more questions about possibilities……

Hi RMAA,

The positives are it’s part of the SE growth corridor of Melbourne, new (additional) train station due to the population growth, more schools etc. but there is a lot of land around to build on at the moment.

That is both good and bad… Good that it is in a growth corridor that is seeing Infrastructure being built – bad that it is in an area that has heaps of land available.
Speaking of which, how big is the block the house is on? Since it is land that appreciates in value, THERE is where the future value lies:-
1. A larger block provides options a small one doesn’t
2. The location will never change – that could be good, or fantastic, or not so good…..
3. In a new development, it may take 10 years before the overall values climb high enoough to give you back a bit of Equity. Not much of a problem for Home Buyers, but not so good for investors.

Re your accountant, many are simply “scorekeepers” who don’t have a lot of knowledge outside of “balancing the books”. Also, in most cases, they are not licensed to provide financial advice – as such, the fact that they are “leaving it up to you” does not surprise me…..

One other thought out of left field re this:-

But due to the bank valuation we can’t borrow enough on the mortgage to pay out the third (they won’t accept that it’s only worth $460k because of the RE appraisal) so we’d have to borrow it from elsewhere.

Other words from you indicate it might be nearer $520k to $550k. If so, then this is up to $90k higher than valued. The “third party wanting out” would be due an extra $30k, yes? The remaining parties have the extra Equity, even though they can’t borrow it YET.

So, can you talk the “third party” into accepting whatever their share is at the $460k sale price, with a promise that the remaining partners would come up with the other $30k in (say) 3 years time. You can save this with just $200 a week over that time, or look at refinancing then. Get it all signed up legally so there are no mistakes or mis-intentions….. maybe even offer slightly more if they are prepared to wait – negotiate to make a win/win/win….. ;) Can that work?

Benny

Hi Denis,

they want me to come back with a whole lot of details around my financial situation etc.

Largely, they likely want to know that you have assets that have Equity to spare. If you had a PPOR that was leveraged up to the hilt, and few other assets, they would probably lose interest in you real quick.

Now, I don’t know either SFG, or AWA – all I can share is what some operations do, and it is NOT to your benefit. Check any marketing group against these things, and if you see too many of these warning signs, RUN away.

As others have already commented, there are a few “signals” that tell you such operations are after your money, and have little interest in your financial health.

That first comment about “looking for Equity” is the big one. They need Equity in your PPOR to “hide” the extra $$ as the house they are looking to sell you most likely WON’T pass a valuation at the Contract Price as the latter is TOO HIGH!

Second, they will want both members of the family group to be in attendance at all meetings (no good if only one signatory is present).

Third, they will ONLY be recommending new property, and they will “just happen to have” a steal that will suit your situation well (Yer, right!).

Fourth, they provide a one-stop shop – with an accountant and a solicitor, and often even a LENDER all ready to stitch you up.

Another give-away is that they may likely be flying you to the Gold Coast from either Sydney or Melbourne – this is because even their over-priced offerings “look cheap” and you will be heartened to buy on that fact alone. What they DON’T allow you to do is to check with other RE agents to get an idea of “comparables” (which would likely show you that you are being ripped off). Even when travelling to view the house, the drive may be quite circuitous (so that you won’t see any billboards from other Agents selling H&L’s). It is also likely that the one they are showing you is NOT the one you will be buying (it is not quite ready yet – but they will show you one that is tarted up and looking good). Of course, yours will look every bit as good on completion (if you cross your fingers…)

Be very careful with ANY organisation that operates in a similar way. And, if walking out while the selling pressure is “hard on” is hard to do, do think how much harder it would be if you had signed at their insistence, and later found out you had been duped !! With ANY purchase, you should make the time to check it all out with your Solicitor BEFORE you sign anything. If someone is rushing you to sign “that day”, ask yourself WHY they are so insistent?

Good luck – keep your running shoes on – you never know when you might need them, ;)

Benny

Hi RMAA,
Now is a good time to really think this through, and to help, here are a few thoughts that might steer you one way, or another.

There is obviously more to “the numbers”, with four of you in the deal. You might not want to share such things on forum, but you should do so with an Adviser. Major one is “What do you owe everyone if wanting to purchase their shares and retain the house for yourself?” See, I would guess you might have all “chipped in” for Deposit/Costs, and perhaps even yearly expenses – interest, rates, Insurances, Maintenance, etc. So, “Who gets what” in the carve-up?

Getting that part agreed to would be a good start. Without agreement, you wouldn’t know how YOUR final numbers might look.

Re buying a House and Land, these are often “loss leaders” for up to 10 years, as the developing company takes a lot of cream for the risk of building them in the first place. With ten years gone by, it “might” now be due for a better lift in value (or not).

Not all developments are equal – some are great value from day one, with amenities added regularly (schools, shops, etc), and in areas that become quite sought after. Some have a decent amount of Land, while others have large McMansions shoe-horned onto tiny blocks. Some have quality-built homes, while others are quite shoddy.

I don’t know Pakenham – it might have some developments of each kind. Then again, your part of Pakenham might be different to the rest of Pakenham – do look around at “comparables” and their sale prices in your area, or check in again with the RE agent. Talk to them about where the market is now, and also read up to see where the market “might be in another xx years”. e.g. is the Local Council spending money there? For what – better footpaths, better infrastructure, more shopping complexes, new schools, hospital, etc.

For your next buy (including when “buying” this off your family members) look for a Problem that you can Fix. Steve says “Buy problems and sell solutions”. Unfortunately, the H&L purchase was “Buying a Solution”, and all of the profits went to the developer. For this place right now, is it a “Problem” that you can solve?

e.g. Is it a bit tired, and a cosmetic reno might (a) lift its value, and/or (b) command a higher rent? Is the problem one of “The rest of the family want to quit it, and they will be very ‘kind’ to you if you help to make the problem go away?” (i.e. will they leave their Equity in the place for you so long as you take all of the trouble off their hands?)

You made a good point about the costs to “Buy into something else”, and you are right. Selling this would have its costs, but so too would KEEPING it. The permutations around these “numbers” would be more easily handled if you discussed this side of things with a Mortgage Broker, who probably has a computer program that will quickly run through all the possibilities to show “Which decision is FINANCIALLY best for you.”

Good luck with your decision,
Benny

Hi Tyzzer,

There are a number of Mortgage Brokers on the forum – look at a few threads in the “Help Needed” or “Finance” forums and check the signatures of those who respond. Most of them say “You don’t need a Broker nearby, as all work can be done using FAX, email, etc.”

Of course, YOU might want to be able to drive across town and sit in front of your adviser. Quite understandable. Or maybe something can be arranged using Skype or similar so that you can be “face to face”…..

Maybe some of our members can point you to a knowledgeable MB in Perth,

Benny

Hi Tyzzer,

Great question, and one that I am sure many of us have agonised over before. One of Steve’s books talks of “Multiplication by Division” (clearing non-performing assets to harness Equity and invest into better-performing assets). In short, his examples indicated “Sell one to enable you to buy two”.

Now, there is SO MUCH wrapped around that – and you have alrady hit on some…. CGT would be a biggie, but then so too would be selling costs, buying costs, stamp duties, LMI, loss of rents, etc. So finance in all its forms are at the heart of this situation. I am almost certain Steve would be saying “Run the numbers” – and that would likely start with a huge “heart-to-heart” with a Broker whom you know and trust.

There are a host of other things to consider too – others would include “If you sold, is there somewhere/something else that will return you a way better performance than what you are selling”?

Or “Is there a way that you can invest some $$ into what you already hold to add to their values, or their incomes”? (Make them positive geared, and/or ready to sell – whichever….)

Keep in mind what I think are three of Steve’s main mantras:-

“Buy problems, sell solutions” –
“Make the most money, in the shortest time, with the least risk, and the lowest aggravation” and
“Does the decision you make move you closer to your goals, or away from them”?

It is great that you are thinking “What’s next?” – I hope others (particularly finance people) will reply to add their ideas too.

Well done so far! ;)

Benny

Hi San,

I am hearing from BA’s that its not possible to get positive cashflow properties in metro cities.

That could be right if wanting to be within a few Km of a city centre. But further out, I’m sure you can still find +ve geared properties (in Brisbane at least – maybe not in Sydney or Mel, but I am not there).

Generalisations can be a trap – beware. Do your own research to arrive at YOUR truth.

Perhaps reread Darryl’s story – he created his own truth by buying in Regional and/or Outer suburbs of major cities where he COULD get a positive return, and then HE added Equity (price growth) by renovating:-

https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977

Could you do that too? ;)

Benny

Hi San,

Wow !! I have heard (from two on here that give regular updates – DT and Corey Batt) that Adelaide has been getting a good uplift in values recently. But I could never see myself paying $640k for something that only brings in $450 a week. With all other costs added, this could be HUGELY negative geared.

Is this one that fits your goals? i.e. you might have a Host of positive geared IP’s already, and need a neg geared one or two to offset the others. Corey or DT can probably tell you if that price sounds “About right” or “over the top” anyway.

Too rich for mine…. ;)

And, re the Housing Commission place, I’m with Corey – I don’t know many of my neighbours who live 100m from my place, let alone 300m. But then, if there was a regular congregation of Harleys and leather-clad persons with patches at a house 300m away, I would take notice, and perhaps steer clear if purchasing…… Discretion before valour !!

Benny