Hello fellow investors!
I’ll be as brief and succint as possible, but it’s a rather difficult scenario we have to share.
1) We have 3 I.P.’s, Value-$450,000, Owe-$384,250 (85% L.V.R.)
2) Parents willing to sell us 2 of their I.P.’s that they have held for
over 5 years Value-$520,000, Owe-$0, Willing to sell to us for
$300,000. (Instant equity of $220,000 and L.V.R. now at 69.8%!)3) Will our parents have to pay C.G.T., or can we minimise this?
(One of the houses was pre-1985)4) Would it be more viable to give them the $300K, ask for $200K
back and purchase (outright) another I.P. returning $250/wk
rent, thus increasing our debt servicing ratio (D.S.R.) We would
then be able to give our parents $100K per year without
detriment to our D.S.R.5) Total wages income p.a.- $ 80,000 (gross)
Total Rental Income p.a. – $ 36,140 (gross)
Total Mortgages p.a. – $ 47,688 (nett)I think this equates to a D.S.R. of 75.78% (30% of wages plus 80% of rental income) So it seems we have bucket-loads of equity but bugger-all servicability!! Is there a way around this as well, or are we stuck for a bit?!
6) Is this making sense, or have we left out some important details
out??Slightly confused,
Bangers
“The answer is already “No”……Unless you ask!!
Originally posted by Bangers68:1) We have 3 I.P.’s, Value-$450,000, Owe-$384,250 (85% L.V.R.)
All good so far.
2) Parents willing to sell us 2 of their I.P.’s that they have held for
over 5 years Value-$520,000, Owe-$0, Willing to sell to us for
$300,000. (Instant equity of $220,000 and L.V.R. now at 69.8%!)Transaction will need to be at arms length (ir market rate) otherwise ATO could conceivably consider the transaction as tax avoidance and you could fall foul of section 4A.
3) Will our parents have to pay C.G.T., or can we minimise this?
(One of the houses was pre-1985)Parents will have to pay CGT on the sale of the property that was purchased post 1985. The other will be exempt from CGT but when sold to you it will become subject to CGT if you sell this property some stage into the future.
Given the unique nature of this property I would strongly suggest that they do not sell it (even to you) but rather they look at ways to leverage off it for their own benefit.
4) Would it be more viable to give them the $300K, ask for $200K
back and purchase (outright) another I.P. returning $250/wk
rent, thus increasing our debt servicing ratio (D.S.R.) We would
then be able to give our parents $100K per year without
detriment to our D.S.R.If I understand this you are getting two properties for $100K up front and then progress payments of a further $200K over the next two years.
Well – not being it for me to say but it seems you are only looking at these transactions from your perspective. What are your parents goals? What do they want? How are they using these IPs?
They do have needs that should be considered too.
5) Total wages income p.a.- $ 80,000 (gross)
Total Rental Income p.a. – $ 36,140 (gross)
Total Mortgages p.a. – $ 47,688 (nett)I think this equates to a D.S.R. of 75.78% (30% of wages plus 80% of rental income) So it seems we have bucket-loads of equity but bugger-all servicability!! Is there a way around this as well, or are we stuck for a bit?!
If you do have bucket loads of equity then consider a no-doc loan. Interest rates are comparable and they are relatively easy to source by a good broker.
6) Is this making sense, or have we left out some important details
out??You haven’t told us waht you parents want.
Whatever you do you both need to get some serious independent financial and accountancy advice.
Slightly confused
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113
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