FHOG vs IP

[jude]

I have been reading your posts for 6 months now and would like to thank you for sharing your knowledge and experience. I am hoping that you can help me get started!

I am a baby boomer in my 50's and would like to buy property in Brisbane. I have a son attending UQ and am considering a unit in St Lucia.

My question is

* Should I purchase in his name (FHOG) and convert it to an IP after 6 months. Are there costs involved other than the transfer of ownership? Is this legal as he will remain in the unit and will rent out 2 rooms to friends for 3 years.
(He is in his 3rd year of a 5 yr degree)

Or
* Should I Purchase it as an IP.

I am on a decent wage so will benefit from negative gearing.

I have a LOC in place and intend to pay IO. I am not looking to sell but if I needed to what are the tax implications for both?

I am having a case of the jitters, it all sounds so good in theory but actually doing it is frightening. I am married and thus require all the answers to satisfy the other half

 

[MarkB]

Ok, so you want to get the $14k FHOG for your son and then, 6 months later, make it your IP.

Not only will you pay stamp duty on the transfer of ownership from him to you (almost $9k for a $300k property in Qld [check rates here]), when your son really does go to buy his first PPOR he won't be eligible for FHOG.

To me that doesnt seem that great an idea.

You should contact the Qld OSR.

 

[Rob Williams]

I agree with Mark. Option A makes no sense whatsoever.
Option B sounds better, if you're comfortable with it. Don't forget, you can do an Income Tax Withholding Variation to get the negative gearing benefit each payday rather than waiting until tax time to get a refund. It really does help the cash flow situation.

 

[jude]

Thanks for your replies, Rob and Mark.

I am comfortable with the IP option but wasn't sure if it made the best economic sense.

 

[Raddles]

Hi there
there is another option
you do buy the unit with your son as the purchaser (he gets the unit and the FHOG and the stamp duty concessions)- but you are instead his financier - he pays you back as mortgagee with his friends assisting
your son can then refinance and pay you out further down the track once he has a job - and if you are charging a commercial rate of interest - you could claim your expenses
thanks

 

[Peter_Tersteeg]

I agree that you should just buy it as an IP, if you do buy it in your sons name, will he be able to afford to buy the house given that he's a student?

You could be on the loan as a guarantor, but your son will still have to apply for the loan as the primary applicant. Some lenders might ask you to also be on the title (10% ownership) which would make your son ineligible for the FHOG.