Advice Needed

hi Chars
do me favour re dazzlings post I think it was yesterday or the day before ( he does resonable word spread sheets).
and list down ppor cost rent payment etc list it down with alsohow it is owned is it a single owner/company/trust .
come back on here and post it.
I’ll read it and give you a couple of suggestions.
There’s alot of reading and I number crunch so its alot easier with numbers.

here to help

Hi Chars,

I think the large lifestyle changing topic you have going here would best be solved around a table with yourself and both your parents over a cup of tea and an hour or two of crunching numbers with various scenarios.

My understanding of your posts is that all three of you (and bub) are living in the one PPoR, with you each having 33-1/3% of the title.

What was the group’s intent when first purchasing the unit ?? Were you always going to live there, or was it simply to get you ‘on your way’ by building some equity in a property. Either way it sounds as if you have nice parents who are looking after your interests.

My first alternative would be to dump 20K of your burning 24K into your portion of the PPoR. That’ll increase your equity in the PPoR up to 56K, which you can leverage up to buy an IP a bit later. Most importantly it reduces your NTDD. This assumes that there isn’t some over-riding domestic thing that over-powers the financial side of the options you have and you are extremely keen to do a deal.

The cashflow position of the IP you’re looking at would look something like this, I’m guessing ;

Capital

Purchase Price 280K
Stamp Duty ~ 9 or 10K
All other Costs ~ 3K

Your equity in PPoR currently ~ 160K – 124K = 36K
Loan 293K (LVR not good…guarantor there somewhere)

Cashflow

Rent of ~ 9K
Interest of ~ 20.5K
Other costs of ~ 2.5 to 3K
Loss of 14K p.a. (After tax loss no idea with your circumstances)

At 280K purchase price, the IP will need to increase by at least 5% p.a. just for you to break even on the deal. This is real big negative gearing stuff.

This is alot to bite off for a lady in your situation (given the data you’ve provided), and looking at the deal, if I was either the banker or your parents having to go Guarantor, I’d pull the plug on the deal.

Hence, my suggestion to simply reduce your NTDD.

Regarding stamp duties, I was under the impression if your parents bought your 1/3rd out, they would simply apply to the Titles Office and submit the reasonable figure for your 1/3rd, office would confirm and then they’d only pay the stamp duty on that 1/3rd amount. Not that grim really.

Does any of that make sense ??

Cheers,

Dazzling

“No point having a cake if you can’t eat it.”

Dazzling makes some very very good points.

One idea might be to put your current funds into the existing loan. As Dazzling said – reduce the NDD.

Redraw that money and more if required for the new place as a deposit. Take a new loan for the remainder.

Now the amount redrawn will be deductible plus the whole new loan. Try to get the loan for the parents place itemised with splits showing the two seperate debts ie the parents home amount and the new IP amount.

Take the new loan as IO and pay down the parents principle only – this will maximise the tax deductions.

I am not sure whether you can afford to own both at the same time but check it out with your lender or a broker. Gives you another option to consider. It will also mean that you now have two properties working for you capital growth wise. Just a shame that one produces no income.

I can see that your parents have helped you get into the market but they seem to be doing OK too, what with having someone pay a third of their mortgage and not paying them rent? Are they in a situation to pay you fair rent for your third of their home? This mike make ownership of both homes a reality?

I would also contact your local Office of State Revenue and find out exactly what the stamp duty situation is.

One idea might be for your parents to “buy” your share from you but not bother changing the title. I imagine you can draw up a legal document to stop you from claiming that they bought you out and double dipping (I don’t mean to offend just covering bases here). Would this actually make any difference to their situation?

All these are just ideas tossed up for you to think about.

All the best and I really hope you achieve your dream – I was a serviceman myself in my younger days!

Cheers,

Simon Macks
Residential and Commercial Finance Broker

[email protected]
0425 228 985

Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.