Hi All, Looking for advice to check we are on the right track. My parents haven't been all that lucky financially, they have been burnt more than once. They now struggle to rent a 2 bedroom Melbourne apartment $450 per week so they can be close to our niece and nephew etc (Albert Park). We have a young son and rent in Sydney but we want to begin investing in property. Given my parents would much rather pay us rent than a stranger, they'd be reliable tenants and see it as helping us get on. The strategy is to buy an IP that they can live in Melbourne around Camden? and keep the rent flat for them. The property will be as close to +ve geared as we can find (around $350/week would be great). We will pump..sorry trickle… money into this property for a few years and then use the equity to either invest in another IP or buy our own place and have the rental income co-support the mortgage. If I get a good Accountant a savvy financial adviser and some legal advice for a tenancy agreement Then find a reasonable Melbourne suburb that is on the train line but not too far from Albert Park? Then find a broker to assess how much we can lend Then start hunting for +ve geared places the parents like Am I on the right track…anyone foresee problems?
Hi Badger
Wow even from the cold wet UK i would suggest you hold right there.
Couple of potential issues i can see with your strategy:
1) Certainly dont pump or even trickle money into the mortgage itself rather establish an interest only loan with a 100% offset account and place any surplus funds into the savings account. Then when it comes to your own place you can use the funds in the 100% offset account as a deposit and keep things nice and clean.
2) Whilst they are still your parents you still need to bear in mind that you need to ensure the rent is considered "market rent" rather than a subsidised rent. You will be taxed based on the fact that it is a market rent. Also structure will be important as If the property is likely to be neutral or positively geared you might want to consider buying in a Discretionary Family Trust structure which will give you a combination of Asset protection as well as flexibility when it comes to income distribution.
All in all not too difficult but just make sure your Broker is experienced in investing and can structure it correctly.
Richard Taylor | Australia's leading private lender
Hi Richard,
Thanks for the note, it gets me thinking that's for sure. I am wondering what the 'market rent' is based on, will a residex report give us a good indication?
Thanks and it should be heating up soon over there.
Qlds007 is right. You should be conscious about your Broker. If your Broker is experienced then you not face a lot of troubles.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
