There is a house that would suit our needs as a PPR and as an IP due to the two self contained units attached. My query is, if my two children bought into the property with my husband and I, and occupied the units, paying their portion of the mortgage for the whole property, does the FHO grant apply to our daughter (eligible) and would there be any tax deductions, given that we may be technically renting from each other? My husband and I would be living in the house. Maybe a family trust would be the way to go? I am looking for the most sensible way to combine a family home with lifestyle, and at the same time making this purchase part of our family’s wealth creation strategy. Incidently, it’s a wonderful house and much more expensive than anything we have previously considered. The area is high capital growth and close to Sydeny CBD. Thanks for your help with this.
You may want to consider a multi family home in which you will occupy one of the units for a year or two. This will give you an investment property and priceless knowledge of how to run a multi family. If your lucky you may be able to set you rents so the other unit(s) pay for your mortgage entirely.
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Hi,
This is quite a complex inquiry, so I will try to break it down into components. This is just my opinion – you would be well advised to seek proper legal and accounting help for this one!!!
Right then:
There is a house that would suit our needs as a PPR and as an IP due to the two self contained units attached.Okay – first point… be very careful when you combine an investing decision (property) with a lifestyle decision (home). The former needs to be based on fact whereas the latter is mainly opinion. Personally, I think you are on dangerous territory when you blend the two as you can end up with a hybrid result that is less than the best of either.
My query is, if my two children bought into the property with my husband and I, and occupied the units, paying their portion of the mortgage for the whole property, does the FHO grant apply to our daughter (eligible)…From my limited knowledge, your daughter’s name would need to be on the property’s title (as a co-purchaser) in order to qualify for the FHOG. I’m not sure what the rules are about co-ownership (in the case of flats and a main house), but the non-negotiable aspect is that she would need to live in one of the dwellings as her PPOR soon after buying.
While it would be wise to call the SRO, my instinct tells me that to qualify your daughter would have to be the only purchaser rather than being in joint-names (unless all the joint owners are eligible for the grant). Having the property solely in her name may cause some problems – mainly with the lenders, but this may potentially be overcome through guarantors.
…and would there be any tax deductions, given that we may be technically renting from each other?I would expect that, provided the transaction was at arm’s length, you would be able to claim the interest on the loan and other normal rental property deductions. On the flip side though, there would also be CGT when sold.
My husband and I would be living in the house. Maybe a family trust would be the way to go?It could be. Unfortunately, you will need to see your accountant for this one. Ultimately, you need to blend asset protection and tax planning with cost effectiveness.
I am looking for the most sensible way to combine a family home with lifestyle, and at the same time making this purchase part of our family’s wealth creation strategy.Getting back to my original point then, I’m wondering whether or not the two are compatible… if you want to help your daughter out then another option is to provide her with a low/no interest home loan as a help for a deposit. Remember, the FHOG is only $7k, and in the scheme of things is incidental to the transaction. That is, it’s better than nothing, but I wouldn’t especially do a deal to access it.
Incidentally, it’s a wonderful house and much more expensive than anything we have previously considered. The area is high capital growth and close to Sydney CBD.Hmmmm – watch out for emotion as this causes normally sensible people to pay too much. Be sure to do a thorough due diligence – especially on the numbers so you know whether or not you can afford the property should interest rates rise a couple of percent.
My final warning is a general ‘heads-up’ about mixing family and investing. It’s great when things turn out well, but it can be terrible in other situations when what started off as helping becomes a financial millstone for all involved.
Cheers,
Steve McKnight
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Thanks for the advice and cautions. We will only proceed if and when all due diligence has been done and I suspect that will mean that we hang back for a while. Putting some time in between an emotional decision and hard reality often reveals the folly of the former!
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