hi – I have an odd wrap question !
As some may know by now [rolleyesanim] we have built a duplex and my parents would like to buy one.
(but they consider that if they buy, they won’t have enough money left over – cos of stamp duty etc.)I’m thinking now about a wrap.
Is this at all possible, or out of the question ?-
Our unit is valued at $450,000
My parents house valued at $400,000
Do a wrap structure like this:
Deposit from them of $350,000,
and another $50,000 in installments over 25 yearsThey would most probably never pay it out (as they are in their late seventies.)
So they will never pay stamp duty, and never have to pay the full amount either.(We would be forgoing the amount left to pay, and also the $50,000 more that we could have got if we sold to someone else now.)
We live in NSW.
If anyone could shed some light – I would be grateful !
Oh what a tricky question, full of permutations and combinations.
Some things to consider (random thoughts of mine)
A saying is never to work with friends and relies (and for good reason). The egos, the friction, the fact that how would one’s father feel if they were an employee to his son, etc.
Other siblings. If you are an only child, then this wrap may work. But, if you are in a family of ten children, how will the nine others feel about their (potential) inheritence?
Remember, occasionally, no good deed goes unpunished.
The word ‘just’ usually means exactly the opposite.
Do you need to sell the oldies home? After all, if their 400k house was rented out, wouldnt this would be almost the same rent your oldies would need to pay you to live in a 450k unit? If that is the case, then you may have saved yourself 35k in stamp duty, legals, etc.
But, If you were to do it this way, they would have to pay some income tax on the rent
I would try to keep all the properties- unless, of course you have a desire to help your fellow australians by voluntarily paying another 35k into consolidated revenue!
BTW, I am fascinated by duplexes, about to do one myself, and am researching everything I can about them. If you could tell me anything regarding planning, ideas, and building times, I would be much appreciated. Please feel free to post here or PM me.
Another horrible thought. If you do sell one of your duplexes to the oldies, you will be up for some CGT.
In retaining it, you could revalue it (and your own house) when needing money for another purchase.
lol wrappack – we are currently living in the unit that we would sell to them – so no CGT ??
If they rent their house out – they lose an amount of their pension, and there’s deeming, taxes (a nightmare) – plus they still will have no cash freed up.
Inna,
RULE 1) Look after your parents.
Here’s some “thinking out loud”
Put them into your new unit and sign them up under a life timerental or “licence to occupy” or a wrap with $2-00 per month repts over 300 years or something that ensures they can stay for life and have security they need.
In return, they “sell” you their house on VF terms for similar mirrored terms.
Ownerships transfer on death regardless of what’s outstanding.
You can rent out their house and use that income to offset other costs.
This is fine, provided any other siblings and relo’s who might be in for a cut of the estate are fine with it.
Benefit to your parents is they have a brand new, low maint’ house and they are cloe to you.
Hope it helps.
what if your folks rented the property from you at the same amount as teh mortgage payments or the like, they then have their $400k to invest with or live off, and you keep the unit with no complications etc.
Just a thought.
Leigh K
Thank you so much everyone. Very much appreciated
I do have two sisters who are beneficiaries to my parents estate – so anything we do would have to be in total agreement with them.
We all trust each other completely, and my parents definitely want to leave an inheritance to all of us. (even if we don’t want them to.)I love the rent their house out/they rent ours idea – and the license to occupy idea – except it doesn’t free up cash for them. And that’s what they want.
Selling their house and renting ours is a good idea also.
But having $400,000 in the bank would cut a big slice of their pension (they’re on full pensions) and almost the whole amount gets deemed 5% every year. That’s another big chunk gone.I guess there’s something really wrong with my wrap idea – ‘cos everyone has by-passed it
I know it’s not a “make-money” wrap – it’s a “lose-money” wrap (for us) … but it seemed like a plan.Sigh !
InnaWrap pack
You asked for a bit of info on duplexes.
This is our first development – we actually had no assets at all when we bought the block, 2 years ago.
(3 young kids inc newborn baby – one wage – you get the picture.)We bought the block on 6 months delayed settlement, drew up plans & submitted to council in that time, and used the increased equity to finance the actual loan to build the duplex.
We planned on ‘worst-case” scenario with the duplex. The figures told us that even if prices of houses went a bit backwards – we’d still make a small profit.
(But our feeling was that the FHBG was going to push prices way up.)Lots of people these days seem to want small, easy-care yards – so duplexes suit lots of people.
We put a main bedroom and ensuite on the bottom floor, so that retirees do not have to walk up and down stairs to access their bedroom/bathroom.
And 2 bedrooms, bathroom and rumpus upstairs.
We put in a double garage in each, to maximise the field of buyers.We figured that people who’d buy a duplex are into convenience – so we searched for a block in a new estate, with facilities close by.
They are within walking distance of schools, a club, churches, shops, sporting fields, indoor heated pool – and 5 minutes drive to shopping centres and beaches.
They also have a nice view of the water and ducks across the road, and mountains beyond that.We got a project builder to build it, which was cheaper than other builders. My partner designed the duplex and had it approved by council himself.
It took a year to build (delays with rain etc) so it was a LOT longer than we expected. The next one we’ll probably build ourselves.
The duplexes are not mirror-image, as the council where we are does not like that. It’s on a corner block, and has been designed to look like one big house. The block hasn’t been sub-divided yet – ‘cos we’re can’t afford it !
At the moment, we’re not sure whether to rent one out, or try to sell/rent to my parents.
I would love to come up with a way of moving my parents here. They live in a 40 year old house that needs repair, in an area where there is a high crime rate, shootings etc.They love the coast, and my kids and I would love to have them here.
I’m rambling – so I’ll stop here .Inna,
I didn’t bypass the wrap… it’s actually in there.
Also you didn’t actual state your parents needed ( or wanted) ALL the money from the sale of their house up front. But the pricipals remain the same, just the numbers change.
Enjoy
“Don’t work with family” is not a cliche that came from nowhere.
In NSW, Stamp duty is payable within 3 months of exchange of contracts. Even on wraps.
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
Many thanks for your ‘ramblings’ regarding duplexes. Highly informative and feel free to continue to ramble on as much as you like! I am about to attempt a very similar thing north of sydney. I agree with the low maintenance backyard, that is not stencilled concrete in units/villas!
Just a thought. You mentioned it was a wrap to lose money, not a money making one. How much cash do your parents need? If they sell for 400k, they will probably get 385k (after legals+agents). If they give you 350k, they have freed up only 35k. Is this all they need?
How about this. Sell them the house at under market value, and see if you could have an increased share in the estate which they may leave you. They get the bird in the hand, and you get the 3 birds in the bush. But, if they have no other significant assets (which should be deeming) then you are left behind.
Its a tricky question of yours, because they are upsizing and wishing to free up extra cash – much easier to do it the other way around!
Thanks for that. But I have read that you have to pay stamp duty at the market value – and the market value is currently $420,000, or more.
And yep, having more inheritance put my way is a good idea – but could be a bit messy – and I just find the thought of profiting from their passing a bit freaky as it is, without getting extra.TerryW – i thought I read that with wraps – you didn’t pay stamp duty until the house was all paid off. Bummer …. that’s another dampener on the idea.
And yep, my dad would like more than $35K. What for, I dunno. [blink]
Also, my partner would like a bit more than $350 for it. (It’s our first development & can’t afford to give away $70,000)However – I think the answer is staring me in the face.
Maybe we should just build another duplex and make them “tenants in common” when the block is bought.
If mum and dad sell, and we refinance – we could do this. Sounds like a plan ???(manofaction – I did mention your idea and said I liked it, just that it didn’t free up cash for them. With other info on wraps – I see it won’t work. Thanks again !)
Wrap pack – another short word on duplexes. Make sure that Telstra, your energy supplier and the twits in council handling your sewer connection diagrams – all know that you’re building a duplex, and check and recheck that everything is in the right place for the 2 units, and make sure telstra and your phone line contractors come out to the block BEFORE the driveways and turf go down. Don’t believe telstra workers that come out – speak to a telstra supervisor.
We have been mucked around everywhere, and our builder let us down with things he could have easily organised. These things have cost us extra 1000’s.
“It took a year to build (delays with rain etc) so it was a LOT longer than we expected. The next one we’ll probably build ourselves.”
As Owner/Builder would you then be able to sell the Duplexes in the first 2 or 5 years?
Hi Inna,
When you said “Wrap my parents”, I had visions of someone selling their parents on an installment contract![laughing]
Perhaps there’s a win-win outcome where your parents live in the property (perhaps pay rent?, perhaps a lease-option), and allow you to use the equity in the unit to invest in other deals. No stamp duty etc..[eh]
It’s cool to help out, but what is YOUR outcome? What goal are you trying to achieve? What do YOU get out of it?
Is doing the deal for your parents the best outcome for everyone involved?
I don’t know – this is something only you can say.Brent Hodgson
PropertyInvesting.com
Admin ManagerI’m going on a property buying tour! Want to receive the e-mail diary of my trip, hear about some of the great Positive Cashflow deals I find, and perhaps discover some great opportunities for yourself? PM me!
Anyone wanna buy ’em ???? [biggrin]
(Mum’s a good cook, but dad has a bit of a flatulence prob) [ohno2]
I’ve thought about the renting bit – but I can’t work the numbers out, as to how they can easily afford to rent it, and still have lots of money freed up.
My reasons for wanting to help ’em out ??
I know it’s nothing to do with investment, so doesn’t belong on these boards … but –
– they love this area (they used to holiday here every year) and hate where they live
– their house is starting to need too much maintenance as it is old, and the yard is big and too much to look after
– they don’t have hardly any friends around where they are – and there are lots of activities, groups for seniors here
– they’ve had a hard life & deserve some happiness
– my sisters would also like to see them move from where they areSo what I get out of it is worth more than money
Prop16
What does this mean : ???
“As Owner/Builder would you then be able to sell the Duplexes in the first 2 or 5 years?”
Thanx re the duplex help- hadnt thought about that!
I think the comment regarding selling in 5 years relates to this. If a building is sold, it has a guarrantee of (I think) 6 or 7 years. If you are owner/builder, then you are liable if something goes wrong with it (because you probably dont have builders insurance) After 7 years, not your problem.
THought about your predicament a bit more, and have come up with a solution, but you will NOT like it, and neither will hubby. Have your oldies move in with you. That way they get to free up some cash, you get your mums cooking. But dads farts may put a damper on things.
BUt seriously, have you considered building another duplex, where one of them has two front doors and access, which could be turned back into the one house by knocking down a wall. Ie build a five bed, three bath house with a combined central wall, and they have the 2bed 1bath area while you get 3beds, 2baths and no farts? This would allow them to free up cash, downsize and live close (but not too close)to their daughter.
Inna,
as far as I know, being an Owner/Builder and not a Registered Builder in QLD., we are not allowed to sell the property we’ve build in the first 2 years. That was quite a few years back.
Lately they’ve changed it to 5 if I’m not wrong. Might be a good idea to check it out before you start.Also the TAFE college has got a course for Owners/Builders.
Another option is to look for somebody with a Builders Licence who isn’t active anymore and pay him for using his licence and looking after the buildingworks till the end.
Prop16
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