Hi all –
I currently have one IP and a family member (Father) who also has one has just floated an idea to go halves in buying a second IP. The idea would be to go 50/50 on all income/costs and then sell in 5-7 years (or for me to buy out the other half and hold). Overall, my long term goal is to continue to build the IP portfolio and also eventually buy a PPOR (currently renting).
Just wanted to see if anything to be cognisant of when going 50/50 with another person:
– I’ve heard that if you go 50/50 that when you go for a loan down the track for another property the banks will take 50% of the income but 100% of the loan repayments when calculating your borrowing capacity (i.e. they assume the other partner won’t make any repayments) – is this true? If so, I can see this arrangement as blowing my borrowing capacity out of the water for any further purchases and probably a deal breaker.
– Anything else to be aware of? Also FYI – I’d be looking at some sort of written agreement on how we plan to purchase/management/sell between the two of us (i.e. what happens if one wants to sell and one doesn’t, significant repairs required, etc.).Any advice much appreciated!
Thanksi would also be interested with some ones advice/knowledge to how it works
as im thinking the same thing
dtrump wrote:I've heard that if you go 50/50 that when you go for a loan down the track for another property the banks will take 50% of the income but 100% of the loan repayments when calculating your borrowing capacity (i.e. they assume the other partner won’t make any repayments) – is this true?Correct – however there are some lenders that will take into consideration your portion of the liability only but you are limiting your scope of future lenders.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie – thanks for this info, appreciated. Are there many of these vendors you refer to? And are they less favourable, i.e. not as good deals as other lenders. Would you consider this a deal breaker? I am thinking the effect on my borrowing capacity would be pretty dramatic and would put me out of the game for further borrowing.
No, I wouldn't consider them to be less favourable – it's just that there's only a limited number of them which narrows your scope of future lenders. I wouldn't say it was a deal breaker – it all depends on your long term plans.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
thanks for the info jamie
Do you happen to know who these lenders are?
Yes Jamie like every Broker now who they are but you wouldn’t expect him to set them out in a public forum.
Like a magician showing you how he performs a card trick.
Safe to say they are big major lenders with a leaning towards investors.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Also think about death, divorce and bankruptcy.
What if one wants to sell and the other doesn't?
Stamp duty and CGT iimplications of one buying out the other etc.
Accessing equity down the track.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks everyone for the information that has been really helpful
Also think about the ageing process. Presumably your father is much older and so, we have found, that as family members age, there is a whole other set of challenges. So along with death, divorce and bankruptcy add on to that dementia.
Good luck with your purchase
Very good point Cherie!
All should encourage their parents to consider appointing an enduring attorney to look after financial affairs if they are unable to and also a enduring guardian to look after their medical and lifestyle decisions if they are unable to.
Once capacity becomes an issue then it is too late and an application will need to be made to the Guardian Tribunal or the Supreme Court which will be very costly and may not result in something the person would have wanted.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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