I am 25 and have been reading a lot on investment but haven't taken any action yet. I have recently started a new job and currently earning 52k + 16k(standard bonus) gross income per annum and she is about to get a pay rise to about 60k pa.
We have been renting a house for about 9 years now at around 335 a week.
I want to buy a house with my sister in Adelaide this year. Our parents offer us about 75k to help us with the deposit and my savings is around 15k and around 10k for my sister. I want to be able to buy a house that can be use for
1) our home
2) a base for my investments in the future (possibly refinance in the future to get more investments, one thing that I am concerned about is how accessible would the equity of the house be if i share with her.)We are currently looking at houses <10 km from Adelaide CBD and we want it to have at least 3 br and 600 sqm of land, costing around 400k. I understand that if I share with her, one of us have to give up our fhog (which means that in the future our spouses won't be able to use it with us too.)
I was wondering if there is any complications on doing this and is open to any suggestions.
2 options: don’t purchase residential property or don’t live in it.
Firstly welcome to the forum and I hope you enjoy your time with us.
Buying with a friend or relative like any investment can have its up and downs.
One thing you need to bear in mind is that irrespective of the amount you both individually put into the deal you are jointly and severally liable for the entire debt. This means because you put in an extra $5K doesnt mean that you will owe $5K less.
Whilst the liability remains equal you may still want to split the loans and have a offset account on each split.
Certainly lenders will allow this.
Accessing equity in the future is not that easy as it will require your sister to be a party to any new additional loan secured against the property and her personal borrowings will have an influence on how much you can borrow.
If you are looking at both buying further investment properties in the future then you need to be fairly careful on how you structure the initial loan set up.
A good independant mortgage broker should be able to show you how you can have your cake and eat it.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Might be easier to look at living in it for 3 years, selling, splitting the profits and going your seperate ways rather than complicating things with trying to split equity down the track.
Definetely a smart move to borrow money to pay 20% deposit rather than using parents for guarantor or joint loan.
You could make the arrangement you get the fhog as you are putting in extra money, the money your sis will make in growth if you select a good property will more than outweigh the fhog anyway.
My brother and I did something similar a couple years ago. I was 22 (24 now) at the time and had been working for just under a year, and to ease the burden of a mortgage we bought a place together. It sounds like it is for similar reasons to yourself, we just wanted a place to live in and not have to continue paying for rent.
At the start of the loan he had a fair bit more saved up but I make larger repayments, we do not have separate offset accounts which Richard up there suggested, however that does sound like a very good idea. Instead we just have an agreement, although it is nothing official, that everything is tracked with a spreadsheet, basically every repayment and most household purchases are tracked so at any one time you can see who owes who however much money. The intention is that at the end one of us will owe the other a certain amount of money and we will each own 50% of the house.
It has worked for us so far, but that being said, if I was going to do it all again I am not sure if I would go down this path. Instead I may have continued to rent where I was and simply purchase an investment property and negative gear and hopefully turn over some profit. Or maybe bought say a 3 bedroom place and live in it and rent out the other two rooms to other people.
Obviously each method has ups and downs and it is not always easy to tell which will work out best in your situation as it is such a long term committment.
All the best
James
We are in a similar situation with a friend. It's not the best option but i guess we all got what we wanted.
As much as possible find other options if there is any. Weigh the risk first.Having said that im in a position where i was going to buy my apartment with my sister and she changed her mind. I feel like looking back after one year i would have been better off as i would be comfortably paying the mortgage payments and easily able to keep my investment property. We could sell in 2 years, take the profit, i would buy a house and she could buy her own place.
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