Is it possible? According to Roy McDonald it is. I’m sure you can defer stamp duty but not avoid it (eg., lease purchase).
On a practical point, my 82 year old mum doesn’t want to move to a smaller more modern place close to shops and transport because of the costs associated with moving, including stamp duty, real estate commission and conveyancing fees. Anyway I’ve started doing a real estate investment course and thought I could help her.
Here’s my preliminary thoughts:
1. I purchase a suitable property for mum to live in, paying a nominal rent to me. I pay all rates etc. Any losses are a tax deduction.
2. She rents her home out to a third party, for a similar rent and continues to pay rates etc. I receive part of this rent.The only problem is avoiding any impact on her war widow’s pension, but how? Not sure if this is a good idea after all. Is there another way so that mum avoids buy/sell costs, keeps her pension and I finish up with a long term investment property in a good location. Not the greatest investment I know, but it helps mum.
Any thoughts to improve my ideas?
Cheers
Neilng
Here’s my preliminary thoughts:
1. I purchase a suitable property for mum to live in, paying $1/wk rent to me. I pay all rates etc. Any losses are a tax deduction.
rent has to be ‘at market value’ $1 will send BIg alarm bells ringing and cause you huge headaches, remember , fruad is a federal offence, doesn’t work like that my friend2. She rents her home out to a third party, for a similar rent and continues to pay rates etc. I receive part of this rent.A similair rent, being $1 ? and you get ‘part’ of this…50c ?? i’m confused
WYour Mum only pays these costs if she sells.. why not her rent out her place, move into a smaller and cheaper place, pocket the difference, you have not mentioned any figures, so it’s hard to guess answers..i’ll be blunt here ( unlike me) are you trying to help your mum, or yourself ? the goals are different
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI have heard Roy say that too. He also said the legal fees involved would be an amount similar to the stamp duty anyway.
Cnetrelink make it hard on pensioners. If your mum rents out her current home, the rent may result in her losing pension or having it reduced. Why don’t you ring them up and explain the situation and see what they suggest. They have financial planners/advisors there that can help you. War pensions may be different too.
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
Contact the Department of Veteran Affairs, not Centrelink.
http://www.dva.gov.au/May God prosper you always.[biggrin]
MarcRedwing
I hope its a win win situation, but the primary purpose is to help my mum.
In terms of the $1 rent OK I take your advice, I didn’t realise the implications.
In terms of similar rent for her existing property I meant market value. Still have to research it, but I suspect about $250-300/wk for a 3 bedroom house in Boronia West, Melbourne.
Cheers
NeilNeil,
Possibly post a few more details, include Numbers of deals on the forum… Example- does she own her property outright ? If not, how much owing, what loan structure is etc.. what is expected rental of where she will move to, etc..
Is she moving into retirement village, or other..
A win-win situation for you both would be great..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorPutting $1 for rent is kind of like red flaging yourself by walking into the ATO’s head office and yelling “I’m ripping off the government!! Look at me!!” and it will result in you being audited and at the very least having your losss denied by the ATO (Redwing was right). More details required.
Also it seems CentreLink are quite good at this sort of thing, so check them out.
Rgds.
Lucifer_auSome details…
My mum owns outright a 3 bedroom house in Boronia West (about 2km from the Boronia and Bayswater train stations and 1km from Knox City). She is 82, has no transport and the house she lives in is old and bigger than she needs. Thus, I was wanting to propose that she moves to a smaller more modern house closer to public transport and shops – either closer to Knox City or closer to Boronia Central.
I haven’t researched the prices in the areas, but a quick look at the web suggests $250-300,000 for a 3 bedroom house in Boronia West. The cost of a new 2 bedroom villa close to Boronia Central would be similar, but the buy/sell costs are huge for a pensioner. This is the main reason she doesn’t want to move.
Thus, I was looking for something that maybe could help me in the long-term but help mum in the short-term. Hence, my suggestion is for me to buy a villa in Boronia Central for my mum to live in and for my mum to rent out her Boronia West property. How to strike a fair solution that does not affect her pension nor her ownership rights over the Boronia West property?
Cheers
NeilA few Questions…are you an only child?
if your mum passes over and you have to think of that at 82 who will benifit from the house when sold /or willed ,You, the Cat society…who ?is there a problem with you buying the house …at a resonable price and letting mum buy herself a small place…check with the vet affairs re how much can mum have in the bank before it effects the pension.she might like to have a little in the bank,why would she want to skimp on a pension when she might be able to have a nice nest egg.Mums wishes should come first its that EZY[buz2]
not to say your not a good person,another idea is if mum owns her house out right
why can’t she borrow the amount the vet affairs says she can have in cash before it effects her pension , rent the house out at the exact amount it costs to repay the loan.if shes not making aprofit she will not lose her pension.
go and live in a small place of your /her choosing
that you buy and she could then pay you a nominal rent.and have alittle spending money.[worried]Hi Neil
I think your idea of a lease/option to purchase is a good one. The only snag is that it will probably need to be done with a third party, to avoid any suggestion of “rigging”.
The other possibility is that you sell the house to someone with vendor financing. So, for example, if the rent on the new house is going to be $250pw, making a monthly payment of $1083, then the loan repayments on the old house could be set at $250pw as well. If I was buying it, to continue the example, I would make 230 monthly payments of $1083, which would then go to you as your rent. These numbers could be fiddled with a little to account for rates etc.
Advantages – these are capital repayments only, so therefore there is no income to affect her pension; there are no agents commissions; legal costs are minimal; no ongoing liability for rates or insurance on the old house; mum doesn’t have to find any rent out of her own pocket.
I’m not quite clear on whether or not you actually want to end up holding both houses, but from your first post it sounds like you’re mainly interested in retaining the new unit in a good location. Boronia is a good rental market, so I think you would do well in the long term.Keep smiling
Felicity
Hey Neil
As Marc says, talk to dva. Depending on what they say about your Mum’s assets and stuff, my suggestion would be:
Your mum to sell her house – either VF, or outright, or to you, or whatever.
You then buy the house that she will then live in, charging a fair market rent, which she can pay for by spending some of the money she gets for selling her house.
Good question about whether you’re an only child – you may need to discuss with any siblings. If Mum does sell her house, she’ll have a tidy sum in the bank, and you’ll need to work out what to do with those funds – again depending on what dva says.
This way, your Mum will avoid the purchasing costs, and will have money in the bank for some luxuries (spend the kids inheritance[biggrin]) which I’m sure you’ll agree she deserves (all Mums do[inlove]).
Cheers
MelThanks guys
I will investigate three options (neither of them are my original one):
1. I purchase mum’s house at a fair market price and rent it out and she purchases a new villa, thus avoiding real estate commission and some legal fees.
2. Mum borrows money on the equity in her house and I find someone to lease purchase the house from her, with her nett income from this not affecting her pension. I purchase a new villa for mum to live in and mum pays a nominal rent to me. This gives mum some spending money and me a property with increased equity in the future. A win for mum but not me!
3. Mum sells her house to a third party using vendor financing (as for 2). I purchase the new villa and mum pays me a rent that’s similar (but less) than the payments she recieves from the house. A win! win!I’ve got some research, sums and talking to do (I have 3 brothers that need consulting too). I don’t want to get mum’s hopes up so I want to be sure before putting an idea to her.
Cheers
NeilPS This could be of wider interest to others on the Forum
Speak to your brothers,
This may effect them in the future
as them if they would all agree to buy mums houseNo realestate involved[no money paid out]
buy at 20% deposit , mother can agree to leave this amount in the home[no Mortgage Insurance required[no money paid out]
only money paid out is minimal gov charges.
Mother comes out with a nice lot of spending money
enough to buy her own unit and live comfortable.Brothers rent out the house to cover the repayments. every one is happy all brothers sharing the wealth and the responsibility of Mum.
where theres a will theres a way its that EZY.[blink][blink]
Ummm… This may sound silly and again raise alarm bells… But could you not have your mum sell you the house for $1?
Many years ago, when my nanna moved to Bribie Island, she didn’t have the money and was too old to get a home loan. My dad (Her son-in-law) bought a house for her and then in a few years time after she had paid most of it off, he sold it to her for $1. THe rest of the money was handed over as a “gift”.
What implications would doing that have today? (Not taking into account other family members)
Cheers
Steph.Success is 1% inspiration and 99% perspiration.
Hi…
It may sound crazy, but she could rent a smaller house closer to shops etc and with the money gained from selling her other house (tax-free) she could set up a trust and you could assist her in investing that money. Perhaps you could both invest money in the trust evenly.
I believe that one must sell their property at market value. The taxman would be pretty quick to assertain that he wasn’t get the right stamp duty.
However, I’m really a novice here, so I’m not sure if that’s helpful information or not…
[blush2]
Just to fill evryone in.
I spoke to my accountant and he didn’t like any of the 3 options. The third could work out OK financially but could cause unnecessary concern for an 82 year old mum.
His suggestion was along the lines of one from my 84 year old father-in-law. That is, renovate the house to make it more lively and modern, hire new furniture and sell privately. The house is very tired and needs some paint etc. The carpet is 35 years old and there’s oak floor boards underneath that could come up a treat with some ‘spit and polish’. Also, one of my brothers in Melbourne is a retired teacher come builder and another a professional handyman/ Mr Fixit, so they can help with this solution in a big way. This sounded like a good solution and it would be a fun bonding session with my brothers who I don’t see often (I live in Canberra).
If done well, the renovation can add significantly to the value of the property. It is in a good street and has a good location, so we certainly wouldn’t be over capitalising. Selling privately would save RE commission. My teacher/ builder brother has done this successfully before and I have plenty of literature on it.
We now need to have a face to face chat with mum to see what she really wants, bearing in mind she has some good neighbours where she lives and they are familiar surroundings for 35 years. We may have to consider making her home more comfortable where she lives and look at options for making her life easier, especially through assistance from Vets Affairs. Mum’s a war widow but very proud of her independence and doesn’t easily give in to outside help (unlike my 84 year old father-in-law, who works the system like a charm).
As I write, my teacher come builder brother is replacing her shower with a fibreglass one to make cleaning it easier. We’ll see what happens!
Thanks for your help guys.[biggrin]
Cheers
Neil
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