Hi. Can anyone tell me if they have bought an investment property and rented it to a family member and if the ATO is happy abt it? Daughter lives interstate from parents. Thanks so much in advance for any help you can give me. [
]Linda
Hi Linda,
I can see no problems at all in renting to your daughter. To safeguard, prepare a lease agreement, lodge rental bond to keep it all above board and bank the rents. I think the rent would need to be a fair rent, not too cheap but otherwise nothing different than renting to an unknown.If I knew then what I know now……….you know how it goes
Hi Linda
As ActToday suggested, the ATO doesn’t have a problem UNLESS it’s well below market rent, and therefore the property is negatively geared, with the consequent tax deductions. If rent is ‘close’ to fair market value, then it’s not usually a problem, even if the property is then -ve.
Cheers
MelI would rent to her at a lowish rent. To support yourself in case of an audit, keep cuttings from a for rent section of a newspaper, or an agents rental list to show that it is market rent.
Terryw
Discover Home Loans
North Sydney
[email protected]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 AcToday, Mel and Terry for your replies. They were very helpful.
Hi
It is a good idea to have all the formalities in place when renting from/to family or friends which has been mentioned. The third party intervention is a real godsend if there are issues.
There are Property Managers that will provide you with a written appraisal on market rent of the property (in a range).
This can provide you with the option to select the bottom of the range price to rent to your daughter or thereabouts.( great for Tax purposes )
You can negotiate the %fees & letting fee on a property as well.
I rented one from my parents (Their IP ) a few years back and I/they maintained a 3rd party Property Manager throughout the rental period. My sister also rented the property for a period under the same arrangement recently. We paid the lower end of the rent range but everything was alot more comfortable for each of the parties. They also live interstate.
We had a Tenancy Agreement, Standard Bond, Property Condition Report & Regular Inspections.(the usual things).
It can be the simple things that can tear apart families and friends and you cant put $ savings on that !!
Just a thought.Regards
“Do not follow where the path may lead. Go instead where there is no path and leave a trail” Ralph Waldo Emerson
Hi
I rent two properties to my family, all at market rents, where they would not have been able to get rental accom. By doing this, I provide them with a rental agreement, a lease, no bond, and a property report. The money is banked directly into a bank account so there is always proof and records.
For those on benefits, centrelink require a copy of a lease usually and I have had to complete forms with details twice for one party and not for the other.
My properties grow and at this time are looked after, but I also have landlord insurance to cover me. I do not pay an agent, but in some cases I would advise this to remove yourself from the emotional issues that can arise.
My family know I am hard but fair, there are no ifs or buts about rent, pay it or suffer the consequences.
I also rent with an agent to other people who are not tenants.
AS for my family, paying regular rent and being “in the market” gives them some rating for any further possible moves.
cheers
Thank you Jancrow and elves for your input as well. Will certainly take everyone’s advice.[
]Hi Sweetie,
Anyone can rent your property, even you can rent the property to yourself if it was structured in a trust.
When ever renting to a family, ensure that the correct legal process is in place, best to have a third party such as a real estate agent to handle and distribute the rental to you. Or still you can setup an Escrow Trust, though this is doing it privately and is probably more costly to setup, unless your are dealing with commercial property, then it would be visable to do so.
Cheers,
sisLinda,
Currently I am renting from my Sister-in-law living only 15 house away from me. I pay rent at market price to the real estate agent. This way the ATO won’t think I do illegal thing.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]
]
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