Before I start the sage – yes – I know I am lucky to a certain degree.
In 1985 my father purchased a house for my brother to live in.
In 1986 my father purchased a house for me to live in – both with nominal rent for a year or so…then he said no more rent!My father passed away in 1987. My brother lost his house to the bank in approx 1989. In 1989 my mother ‘relocated’ us ( my partner and new baby ). My brother has lived with my mother ever since and rarely worked ( due to a back injury – like there is NOTHING he can do>??), so she is basically supporting 2.
she is now 72. he is 49.
My family and I have lived in this residence ( her investment property ) for 17 years. We pay no rent – as was the arrangement.
We pay the yearly rates and have done improvements and maintained the property for these years. ( hard to establish but around $120K) She has told me over the years that this property will be willed to me and the house she is in my brother will have. The problems we have had over the years have been minimal until the last couple where major maintenance issues cannot be completed by ourselves and I have asked her for assistance. We are unable to obtain a loan as we have no equity in the property etc etc etc. She has been unable to assist.Last week I phoned again to ask if she could possibly assist as she has recently sold and moved and obtained around $60k from the sale. She owns her house outright….and has done many improvement since moving in.
She proceeded to tell me she did not have a ‘bean’ and that she would have to sell this property to ‘get an income’ – she had to ‘think of herself’ for once. I am totally shattered and sought all kinds of advice and options. However, on approaching her with this knowledge she told me I was wasting my money that she had looked at all options with her ‘accountant’ and it was the only way – to sell.
I can’t help but think she has not been advised fully. I mentioned reverse mortgaging to her which she was quite offended by.
I mentioned about going guarantor for us to build a block of land, build and sell, relinquishing her of the guarantee.( that is a very basic description ) She fobbed this off as well.
It has now been suggested that we obtain a line of credit interest only loan and purchase the property from her. It would not be its true value and I shall mention figures below. We would then be able to create an income for her, receive ownership of the property, maintain the property and sell in 3 years.purch price : $145K (1989)
current (possible market value with no refurb) $800K
current ( possible market value with refurb) over $850K
8 acres….south of perth.please do not attack me……..all I want is a win, win situation.
thanks
Apologies I failed to mention we had thought of the figue of $400K to offer her. Our line of credit loan would be for around $470K allowing for 3 years of repayments and funding for maintenance.
Might be better to buy the property if she will sell it to you. That way you can control things. There are a lot of bad advisors out there, so I understand your worry.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
Hi Browncat
I’m sorry if this does sound harsh, it is not meant to be.My first reaction to your post was that of disbelief and to some extent anger.
On re-reeading it I do actually feel a sense of compassion.
However having said all that.
As I understand the facts you presented are:
You have lived in this house rent free for 17 years
You have paid for upkeep and reapirs during that time.
You aging mother is looking for an income and justifyably looks to her asset base to provide that.
If you buy the house from her at a reduced price then her asset/equity base is diminished.
If you then sell 3 years on, who reaps the profit??? Is there to be some profit sharing with your mother, given you would have paid well undermarket value? How is your partner going to feel about that if / when the time comes?I beleive your mother is justified in her approach to what is essentially her asset. Is she only looking for an income?
Not a nice situation for you all to be in, this sort of thing never ceases to amaze me. Families can be torn apart bby this sort of complicated situation. Tread carefully.
Regards
SueMIT | Owen Real Estate
Email MeFor the sake of your own integrity, I think you should buy it from her at fair market value or else step aside and allow your mother to sell it to someone else at a fair price. Surely, she does not owe you anything more? It may be time for you to take control of your own situation and buy yourself a house that you can afford or rent one independently. What your mother does with her assets and money is her concern.
OshenIf you don’t have a mortgage and have a job why can’t you take out a personal loan to do the maintenence work that you want to complete? she shouldn’t be paying the maintenance if you’ve been living there 17 years rent free.
Instead of buying the house off her couldn’t the following work:
– you start paying a nominal rent to her weekly of say $300 a week.
– i imagine this rent would be below market value, but considering you look after the property maintenance and rates and other expenses this would be reasonable
– in her will you will gain ownership of the propertythis solves the problem in that she doesn’t have to sell the property, she has an income from you to survive on and you have a house to live in.
Could some arrangement like this work?
Hello Browncat
What a horrible situation for everyone involved.
You haven’t said so but from your post I assume that your not in a position financially to be able to give your mother the amount of money she needs to live on, as rent. I assume this would be well above market value as it would not be fair for your mother to have to just “survive”.
If you are/were, a Lease option would be better then buying the property. It wouldn’t invoke a CGT event which would cost your mother massive CGT (around $120K+ I think ) and would also cost you stamp duty. If it was for a period of 30 years and she was willing to leave the property to you in her will then it would give you almost the same security as if you had bought it now. I assume it would also be consideably cheaper than paying the interest on the loan you would need to take out to buy it. You would need to make an agreement on what would happen if you wanted to sell the place after X years. She would naturally get the bulk of the sale price but you should have built up some equity in the place in the mean time through capital appreciation. Maybe you could renovate/improve the place slowly to also add value. On top of that you will have paid something towards your puchase each week in the rent. For example anything you paid above fair market rental.
If the above is not possible, is the property interesting for subdivision?
Do you farm it and if not is it possible to rent out some of it for farming/ grazing? Will it help bring in some income for the option above?
Hope you find a win win solution
Good luck
ElkaBrowncat,
1. If you have not paid rent for about 17 years, have you saved that money? Or did you spend it? If you saved it, you would have a large deposit to buy that house.
2. As the previous poster, I think that paying rent could be a solution for your mother in respect of income.
3. A better alternative could be to set up a lease-option arrangement, where you pay rent above the market value (or by mutual agreement), and part of the rent for a period of – say – 5 years, would go towards equity in that house. Then, purchasing the house would be a bit easier (at an agreed price today).
Browncat…
I don’t know your situation but I can tell you that you probably know, deep inside, what you should do. Often a forum post is receive feedback which either confirms or negates what you know is righht.
The question is.. what do you think you SHOULD do, not what do you want to do
Luke
LIVE ABUNDANTLY
John 10:10
You must be logged in to reply to this topic. If you don't have an account, you can register here.
