Does anyone know about selling a percentage of ownership of your property?
Know what about selling it? How the bank treats it (partial release of security), how to subdivide (generally see a town planner and surveyor) …..
Here's what I was thinking. Say you buy a unit for $600,000 then you renovate it to up its value to $700,000. After this lets you decide to sell a percentage of the property to an investor say $200,000.
I was primarily concerned about how does the bank treat this in terms of providing a loan to an investor for partial ownership and does this incur stamp duty?OK, firstly I've gotta ask why would you do this rather than taking on a partner earlier?
Selling a portion is always looked at as a distressed sale, your selling price will be reduced and it will be more difficult to sell the remainder. How do you intend to structure it – tenant in common or joint tenants? Which bit are you selling? Who to?
If you are selling, then the purchaser will pay stamp duty.
You need to speak with a lawyer, accountant and banker. The bank can't half sell a property so they would take security over the whole of it. Any changes to title aside from spousal to my knowledge incur stamp duty.
Sounds a strange set up, your accountant may suggest setting up some sort of company structure before you even start to sell shares in the company to the investor rather than the property being in your personal names. The company would then own the property.
Overall not my cup of tea….Thank you for the feedback. The way this is meant to work is as follows:
You buy an apartment worth $600k in a company name.
Renovate it to make it worth $700k then once it's leased for a higher rent sell a share of the property value, we'll say $200k/21% to a low end investor.
This way they take out a loan seperately for themselves and you end up with $200k cash from the bank (minus tax ofcourse) and you're only earning 79% of the rent.
Then you have the extra $200k that you can either put against your mortgage or into your next investment.
If you put it into another investment, even though you'll be paying the same mortgage as before you can claim a higher tax deduction and a lower taxable income.Anyway that's my idea and method of thinking. Keen to hear your thoughts.
Dr doom
Great in theory but i hate to say couple of points worth noting:
1) You will pay CGT on the partial sale but i guess that can factored in.
2) The investor will also need to be on the loan so will need to be happy to be Jointly & Severably liable for the entire debt.Good luck in finding someone who wants to take over your debt.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Ok I see. Well thank you for clearing up that second point about the loan Richard. It's not as simple as one party having one mortgage while the other party has a loan from a different provider.
Much appreciated.
Eh nope …. hate to say.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
