HI,
We are total newbies to the investment property scene, so please excuse any ignorance in my post below!!
My wife and I currently own our own property in Springvale South, Victoria. House is worth around $430, owing around $250.
My wife’s step-father is currently going through a separation and owns a 2 bedroom unit in Noble Park. They owe around $70k on a unit worth around $250k. Since my wife’s step-father doesn’t want to move and her step-mother is willing to be ‘paid out’ to leave the unit, we were thinking of stepping in. We were basically thinking of paying her step-mother her share ($125k). She would then pay off her half of the outstanding loan ($35k). We would cover the other half of that loan, essentially borrowing $160k ($125k to pay her out and $35k to pay off his half of the loan). We would then own 64% of the house (160k/250k) and would set up the house as tenants in common.
He would continue to live in the unit and pay us 64% of market rent (or thereabouts). To cover ourselves, we would draw up a legal agreement which specifies the amount of rent he pays, what happens if one party wants to sell and also what would happen if he passes away.
From a tax/loan perspective, I’m assuming he would have to be a ‘party’ on the loan when we borrow the extra money? In order to claim deductions etc, would things like rates, gas, electricity etc need to be in all names?
Are there other things we should be thinking about? I know people say never to mix business and family, but I feel that if we structure it correctly it could work out ok. Has anyone else been in similar situations and have advice to offer?
Thanks in advance!
We are total newbies to the investment property scene, so please excuse any ignorance in my post below!!
My wife and I currently own our own property in Springvale South, Victoria. House is worth around $430, owing around $250.
My wife’s step-father is currently going through a separation and owns a 2 bedroom unit in Noble Park. They owe around $70k on a unit worth around $250k. Since my wife’s step-father doesn’t want to move and her step-mother is willing to be ‘paid out’ to leave the unit, we were thinking of stepping in. We were basically thinking of paying her step-mother her share ($125k). She would then pay off her half of the outstanding loan ($35k). We would cover the other half of that loan, essentially borrowing $160k ($125k to pay her out and $35k to pay off his half of the loan). We would then own 64% of the house (160k/250k) and would set up the house as tenants in common.
He would continue to live in the unit and pay us 64% of market rent (or thereabouts). To cover ourselves, we would draw up a legal agreement which specifies the amount of rent he pays, what happens if one party wants to sell and also what would happen if he passes away.
From a tax/loan perspective, I’m assuming he would have to be a ‘party’ on the loan when we borrow the extra money? In order to claim deductions etc, would things like rates, gas, electricity etc need to be in all names?
Are there other things we should be thinking about? I know people say never to mix business and family, but I feel that if we structure it correctly it could work out ok. Has anyone else been in similar situations and have advice to offer?
Thanks in advance!