Hi everyone,
Finally i am about to buy my 1st IP so am back to this site as over the last15yrs (yes finally in a place to start) i have found no better advice than right here.I am looking at purchasing a 2 bed strata unit block of four at $139,000 as a joint venture with my father.
We are starting here as basically it is the cheapest thing in town, in a good area with a long term tenant and closest to c/flow positive we can find. Avoiding analysis paralysis we are ready to go so my question is how would be the best way to do a jv?My dad earns around $40,000 give or take me $33,000 he owns his house outright worth around $290,000 mine has a mortgage of $150,000 current value around $310,000.
Plenty of equity between us with dads wage enough for any shortfall in repayments.
How do we make this work for us??
clarify the above. buying one 2 bed unit in a block of four.
Hi cath
Firstly welcome to the forum and hope you ennjoy your time with us.
Good to hear you are taking the plunge into your first IP.
There are a couple of points you to need to consider and I would probably need to ask you personnal financial questions where the answers probably shouldnt be posted on a public forum.
In general if the property / ies are neutral / positively geared you may want to consider buying them in a Discretionary Family Trust name although as i say there are other areas that should be considered first.
Then comes the question of how you finance the deal and the structure used to fund the deposit etc
Personally i would avoid using either of your own properties as security for the new investment property and try to ensure they are standalone.
A good independant mortgage broker with invesment property experience should be able to provide you further advice.
Shoot us an email if you need further assistance.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
thanks for the feedback.
we’d definately be buying with the ip being the security. Looking at using equity from my home for deposit with father paying any mortgage difference, maintenance etc.
just not sure how we make it a fair deal for eveyone involved?Hi Cath
I originally thought that you may be able to use the Tenants In Common method of buying the property with your Dad. However with the information you've supplied with in your post above, you may also need a simple Joint Venture Agreement as well.
I know Richard is very familiar with this type of situation and I suggest you give him a call.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Cheers Paul appreciate the wrap.
Hope 2011 has started well for you.
Sure we will chat again when i get back from the UK.
The more information you have given me cath makes me think the Discretionary Trust is probably the way to go.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
ok,
paul and richard, thanks for the info, i’m guessing this needs settingup 1st?
is there no way to just put our names on the mortgage and agree on what each other adds to the deal?
As it’s our 1st and we need to move quick?Hi cath
I do not really understand on what you are trying to achieve but assume you mean the new Title would be in your dad's name and the loan in your name.
Regretfully you wont find any lender accept this for a variety of reasons including serviceability and therefore as mentioned previously it sounds like a DFT might be the way forward.
This will give you more flexibility when it comes to the income distribution and also assist in the serviceability and structure.
I appreciate you are in a hurry but getting the structure and finance wrong will cost you a lot more in the future.
You also dont want to use your dads security as sole security for the new property and be surprised how many lenders will want or recommend this.Feel free to drop me an email if you like and i can answer any questions you might have before i fly back to Brisbane.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Richard,
I was intending to borrow the minimum dep required on a $139,000 unit from my equity as my contribution and use dads income for repaying the loan. Both names and combined income would be on the loan therefore helping serviceability and getting us both into our 1st IP.
We are seeing a broker today so we’ll see how i go but dad will be fine on his own we are just trying to include me to get started.
thanks for the further info we will be looking at a trust arrangement for future deals.
Hi Cath
Wouldn't use a maximum lvr loan as LMI will be high and unecessary.
Put the property and loan in the name of the Trust and that will benefiit you for future deals especially when your husbands income can be used when his credit history improves. Probably still make him a beneficiary anyway.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
thanks everyone,
well broker said no prob to get started.wecan put three names on mortgage mum,dad, me, borrow up to $300000 depending on valuation of our homes which we valued conservatively and use equity from dads for dep etc, everything we were hoping for to get started other than it seems moving onto house number two will be difficult as our incomes will not raise. Rent of $200 accounted for.
with a trust??? can money be put into a trust undisclosed ie,my husband can put money in without being in the trust or if he is included money from his business, lump sums be used to fund purchases and how then does this affect the overall share of money??
sorry the whole idea of a trust is new to me and seems quite complicated
Hi Cath
Why would you be concerned by the valuation of your properties if they are not be cross collateralised ?
Also sure you can put 3 names on the mortgage but how will you hold the property – that is the important part.
Your husband would not be a Trustee given his Credit History but a Beneficiary (There are a few lenders who require personal guarantees but they are like the plague – rare). Of course he could be included as a Trustee down the track when his credit history improves or if you switch to a Corporate Trustee he could become a Director.
Your Broker should be able to annswer the rest of the questions especially in regards to the Trust and getting into property 2.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
Valuations were more of a concern for deposits going forward than anything else.
Is it not possible to buy and hold future properties without using a trust type setup? Does this limit the flexibility?
We are still researching how to go about all this as you can probably tell by my niave questions, our main concern is being able to get into a position where we can continue buying properties and producing an income from them which seems difficult as our wages will not rise and the forcast rent has been included in the figures to get the 1st loan therefore doesn’t effectively raise our income for the next deal?I’m looking into trusts now. Thanks for the help it seems the best way forward.
Hi Cath
No you an certainly buy in your personal names but you cannot change the structure or percentage ownership wihout incurring Stamp Duty or possibly triggering Capital Gains Tax.
With a Discretionary Family Trust you have such flexibility.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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