This is more so a question that came from my good ol mum…
My sister (19) has approx $30k plus sold her vehicle for about $5k, and has recently returned from working in the US of A
She’s looking at entering UNI next Semester and my parents are trying to convince her investing in a PPOR ( Unit/Townhouse or similair )would be worthwhile, she can use it whilst at UNI, probally rent a room to a friend..
If after UNI she decides to travel, she then has an IP hopefully achieving some ‘Growth’ whilst she’s away..
As she’s recently returned ( 5 days ago ) and is not employed yet, they are considering ‘assisting’ her with gaining finance ( Garauntor ).
What would be the feasible way for them to assist her, possibly even go into the deal as a partnership ?
How can ‘both’ parties benefit from this transaction ??
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Banks want to see long term stable income, and so currently they wouldn’t lend to her (unless she went with a 20% or more deposit, and even then they might not lend the money req.).
Banks also don’t like going Garauntor mainly because if she stops paying they might be forced to liquidate the property holding of the garauntor (i.e. the home you live in), also there are certain legal issues banks don’t want to deal with if possible (usually they will accept it, but this will have no major bearing if bank finance is approved or not).
A possible way of doing it is to go 50/50 into a property deal, that way the bank will feel a lot more comfortable. You would also be able to start a trust with company trustee to stop your assets being involved in any personal lawsuits.
Or she could wait (while holding a job) for a month, banks would probably lend to her, without needing garauntors, if she had 3 payslips.
I would be making services of a mortgage broker for this kind of deal mainly because lack of a job and the short time if she is employed again.
So anyway, summing up 50/50, very large down deposit, or wait approx. 1-2 months get income from employment and then approach bank through a mortgage broker.
Also factor in repairs and higher vacancy rate than normal property.
Rgds.
Lucifer_auHi Redwing,
Just one question……
Does SHE want to buy a PPOR, or is it just mum thinking she knows best? [
]Not meaning to sound rude, but if she doesn’t have a PPOR as an important goal, then I’d let her enjoy her uni lifestyle. You’re only young & free once!
If she is as keen as mum is, then I’m sure you will all find a suitable solution.
Hope she is a good payer though…….Personally, I don’t like the idea of mixing business with family.
Good luck,
Del
Just to clarify they don’t like Garauntors because of bad publicity / media when they are forced to take over other property.
Also there are two ways of going either a Investment loan or a house loan. If it is a house loan she would proably get the $7K FHOG, but will not get rental income factored in (from the bank), if it goes investment loan she will get rental income but no FHOG (she can also get IO loans rather than P&I which up the repayments)… I would go with the home loan (though you lose major points in servicability). Also do NOT inform the bank you might rent out one of the rooms – they will demand you turn the home loan inot an investment purposes loan.
Also Family and Business….
Rgds.
Lucifer_auHi – we helped our 19yo daughter into her own unit by providing $18k so she could avoid taking LM insurance. She has a $10k per annum university scholarship so could show the bank she had the ability to pay off a loan. She received the $7,000 FHOG and rents out the second bedroom to a fellow student.
Things have worked out well and she now understands quite a bit about property investing. We will claim back our $18k when/if she sells the unit which has seen about a 25% increase in 18 months. It’s good to be able to help your kids into real estate.
Hi Shirley,
Well done, but also congratulations to you and your daughter, great to see both of you are getting success and pleasure from your daughters PPOR and importancy of skills and knowledge that she is learning young.
Congratulations to both of you… [^]
Cheers,
sisLucifer, it is my understanding that there isn’t mcuh difference these days between investment and owner occupier loans.
Also, the bank should be more than happy to see written down anything about extra income to support the payments. It may help the loan across the line.
Banks still do accept guarantors, but they will assess the income of the guarantors. Unless there is none, they probably will still let the deal across.
50/50 is not an option if the FHOG is available, as it won’t be paid cos Ma and Pa own their house. If the house is bought for IP only, and not lived in by owner, then the FHOG is still available when a PPOR is purchased.
Redwing, valid point as to whether or not your sister is interested in purchasing a house. Personally I think it’s a better option than blowing the money on a car or whatever. If she is interested, and your parents are willing, go for it, and get them to discuss between themselves what they think would be fair – noting that your parents may not ‘see’ anything for a few years.
Cheers
MelThanks all for your posts more food for thought, i’ve spoken to my mother regarding this, yet to speak to my sister..
Appreciate any input as to how to structure a 50/50 deal or such, 50/50 on an investment property is a bit easier but 50/50 or such with one partner living in the premises..? realising it’s hard with family..
At this stage everyones just talking in the family and ‘throwing’ ideas around..
Parents semi-retired and own 6 acres of mango farm in Broome
“Money is a currency, like electricity and it requires momentum to make it Effective”
redwing,
Don’t forget the CGT ramifications. If the property is only in your sister’s name and she lives there initially then she can exempt any capital growth from tax. A 50:50 arrangement will expose half the gain to CGT.
Lucifer, it is my understanding that there isn’t mcuh difference these days between investment and owner occupier loans.
->There is if you want FHOG.
“Also, the bank should be more than happy to see written down anything about extra income to support the payments. It may help the loan across the line.”
->The Bank will want it to be put down as a IP loan, rathr than a normal housing loan, making it more diffiult to get FHOG. Also it’s harder for valuers to define a rental income from say just one room.
“Banks still do accept guarantors, but they will assess the income of the guarantors. Unless there is none, they probably will still let the deal across.”
-> According to my Mgt Broker they will accept it, but it won’t make a major difference in whether your loan gets accepted or not.
“Don’t forget the CGT ramifications. If the property is only in your sister’s name and she lives there initially then she can exempt any capital growth from tax. A 50:50 arrangement will expose half the gain to CGT.”
-> If you place it into a trust/company structure, your parents could buy the IP (i.e. the bank will look at their income) and your sister could pay the deposit, but she still keep the FHOG avalible. Shares could be given out to your sister, and a family RE empire could be born!
Rgds.
Lucifer_auHmmmmmmmmmmm
Where’s that accountants number……..[^]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
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