Buying from a family member

[auror]

My parents want to sell their IP for about $330k and funnily enough I am looking to buy one between $300k - $400k.

What advantages/disadvantages would there be if I bought their IP?

Advantages
- less hassle for both parties, should be a smooth transaction
- less $$ spent on solicitors and the usual back-and-forth that goes on when buying/selling a property

Disadvantages
- need to be careful re: ATO - don't want to get into trouble or seen as minimising CGT for my parents if the price is seen as too low by the ATO
- they might miss out on getting a better price for their IP (due to the current wave of FHB demand - the property is in Sydney's west)

Any thoughts?

 

[Propertunity]

Advantages
- less hassle for both parties, should be a smooth transaction
- less $$ spent on solicitors and the usual back-and-forth that goes on when buying/selling a property

AND no REA commissions for them to pay

Disadvantages
- need to be careful re: ATO - don't want to get into trouble or seen as minimising CGT for my parents if the price is seen as too low by the ATO

The CGT they pay and the Stamp Duty you pay should be on the sale price or the market value whichever is the higher.

- they might miss out on getting a better price for their IP (due to the current wave of FHB demand - the property is in Sydney's west)

You could always get an independant valuer and pay whatever the valuation is. That way there is no family concern about paying too little/too much. Costs less than $500 and an REA's comm would be $7K anyway, which they're saving.

Still be sure to do your DD and get a Pest & Building report.

 

[auror]

Hi,

Yes I had forgotten about the REA's commission - a potential $7k (good point)

I will be sure to do my DD as I hadn't previously considered the area before. They've had it for a good number of years and it's had a very small amount of CG... They're also sick of the PM and various hassles associated with owning IPs and want to sell.

EDIT: having read the last sentence again, I guess i should explain why I"m thinking of buying it... the area (a few kilometers from parramatta cbd) is possibly due to become more popular as the Parramatta CBD expands... also I would also ditch the PM or start leaning on them more heavily (my parents are fairly laid back and not very good at chasing stuff up with them).

 

[Perp]

I wrote a blog entry on this very issue, which you may find thought-provoking.

 

[auror]

Thanks Tracey You brought up a lot of good points in your post. Ideally my parents should sell their property to some enthusiastic FHB who would pay top dollar for it... and we would buy our IP from a distressed seller whose property has been on the market for ages and is ready to sell. The $7k saved on the commission is hardly anything compared to the money we could potentially save by finding a bargain...

Off to have a re-think about this!