Its interesting to read that there is some concern starting to creep in peoples minds that have put themselves in a highly geared situation.
I had a thought and wonder if its possible to do this and if it is complicated and costly.
Say you have a ip
purchase price $400000 borrowed
rental 300pw…..$15600pa
mortgage i/o fixed 5.8%…$23200pa
p/expenses20%…..$3120
This property is neg geared at this stage.
Say interest rates rise and you find yourself in hot water eg current 5.8% out of fixed time 9%
So things are not looking good from 5.8 to 9%
Payments gone from 23200to 36000pa
Would it be possible to sell say a share of shares in that unit or house. eith 2/50%or 4/25%
So then you have 4 owners or two owners and everything is split up.
if its 3 +1(yourself) owners then $100000 each =300000+100000left in (yourself)400000
if keep do the calcs pos. geared in the future
cap gains if sold shared.
Wouldnt this take the high interest rate pressure
off.
Hey im just thinking hear so if im way off really like your thoughts anyway.
You’re right Carlon, stamp duty would be payable on each share sold i.e if you ended up with 4 owners stamp duty on 75% of the value of the property would be payable (3 new owners at 25% each). A contract of sale would suffice for the portions or shares sold to calculate the stamp duty liability. But it’d be nice to have a valuation to back it up just in case you got challenged on it.
Steve
I’ve got good news and bad news. 1st the good news “Your Success is in your hands!” Now the bad news “Your Sucess is in your hands!”
In the past I have purchased as tenants in common. This makes it really hard if one wants to sell, but the other wants to keep the property etc. If one were to buy the other out, all mortgages, title deeds etc. would have to be redone, not to mention the stamp duty.
In the future when I buy properties with others, I will set up a unit trust that will own the property. We can then have as many units as we like, and have flexibility in who gets the loan. Could be individuals, or the Company if that is the trustee etc. Then, if somebody wanted to sell their share in the property, they would just sell the share in the trust. I believe there is still stamp duty payable (check with accountant), but it saves all the other paperwork and hassles. Also, if there are two of you, you could maybe create even 50 or 100 shares in the place, and only sell off that which gives you the money you required.
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Be aware that the banks tend to view all partners in a property responsible for the loans, so that if one falters, the other(s) will be called upon to service the debt. It also affects your borrowing capacity as banks will view the whole of the outstanding loan, not just your part, when considering a future loan for another IP. There is also every possibility the banks will want collateral from each partner, not necessarily the IP purchased.
Good Luck
[8D]
B. Deros, you might be confusing the joint tenants with tenants in common. Joint tenants is where each party has an equal share. ie if there are two it’s 50/50. If there are three, its 33.3/33.3/33.3 etc.
Tenants in common can say one party 1%, the other party 99% if that’s the way you want to do it. I do not believe that banks care about the percentages though – they want as many people and as much security as they can – it’s all about minimising their risk.
Alf
I did not notice your second posting earlier where you asked about multiple owners and only one of them getting the rent. Check with your accountant/solicitor, but I believe there is a way of doing this. It involves a trust (I think a ‘hybrid trust’), where you can say the income goes to this person/s, or this class of ownership, and the capital goes to this person/s, or class of ownership.
Hope this helps.
Cheers
Mel
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