Ok, so sorry that this is a long post, but if there is anyone out there with advice on this topic I would really appreciate it!!
I do not own any property. Currently living in accommodation provided by my job in a remote area so don't have to worry about rent etc and have desperately wanted to buy an investment property for a few years, but not real confident that I know what I am doing, and also I came close to being priced out of the market I was interested in.
I have found a couple of Defence Housing properties, in the exact suburb I want – within 15kms of CBD, close to all amenities etc. Not a cluster of DHA properties, looks like a couple that were bought by people who then offered them to DHA for a lease. I really like the fact that they only have 3-4 years (plus 3yr option if desired) left to run on the leases, as I do not see myself selling in this time – and I have read this can be one fo the biggest drawbacks of DHA, not to mention high management fees, low rent, etc. DHA interests me though because I am a real novice, and it seems an easy way to get started. Also at the end of 3 yrs myself or my parents would possibly move into this property and not use it as an investment any more.
Here is where it gets a little complicated and I have no idea where to start. I could *just* afford this on my own, with rental income making up about half the payments, but am considering going in a joint venture with my parents so that they can get a bit of equity in a second property – and their current house is literally around the corner, but it is 30+yrs old and high set (value maybe up to mid$400?) and they are wanting a low set place in a couple of years in this area. These houses we actually looked at buying when they were first built, but they are worth possibly up to $100K more).
If we buy it as joint investment for now – say 4/5 me and 1/5 them, and then when the DHA lease is up in 3yrs time they want to effectively buy me out so they can move into it, how would this work with things like capital gains etc. It looks like I would dip out and they would be ok because it will become their residence? There is also the possibility of doing a property swap…I take the old one, plus the difference if there is any (the older house at this time is probably worth about 4/5 of the newer one), and they get the new one and have to pay whatever the difference could be. And we could either sell the older one, or if the market wasn't great we could keep it as a rental.
So:
1. Is a DHA property with only a 3-4yr lease left any good? I guess there will not be a lot of capital gain over that amount of time. Property price seems comparable to others in the area, as does rent, but $485 purchase price/$430wk rent is not a great return is it?
2. Are things going to get to complicated if we do this as a joint venture with the end objective probably being for my parents to take over this house as their principal place of residence? Will my parents gain anything by going in this 1/5th share for a few years?
3. Are my parents better off borrowing $100K to buy a share, use some of their Super (only about $400K left), or interest only loan? Dad is retired, mum works part time so could claim some tax deductions.
4. Am I likely to benefit from this arrangement, or will it cost me more because of capital gains etc? Bearing in mind that my objective when I say 'investing' in property is more to get myself into the market, and build up a bit of equity so that I can then purchase a primary residence or continue to expand with investment properties.Any ideas/advice? Or do you know someone/somewhere I can go to to get this stuff a little clearer? I know financial planners, but they are not all good at this sort of stuff – there would be more knowledge on these boards than most of them have.
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