How can I make this work for my brother and I?

[Keifer]

My brother and I both earn over $100K in salary annually. He is in Melbourne and about to move into an apartment his girlfriend recently bought on her own and is currently renovating. He is not in the market but wants to get in. He has a $100K deposit ready in the bank and only a $10K HECS debt.

I live in Brisbane and have recently transferred two properties into my name after divorcing from my wife. The money I paid out to her pretty much means I am back to square one with my property equity. I have about $15K in the bank and no debts other than the mortgages. The rent I can get from both properties falls short of my mortgage repayments by about $1200 a month (in total).

I was looking at renting an apartment in New Farm (inner city) but with rent so dear, I thought it would be wiser to buy, and am thinking of using my brother's deposit as a sure way to purchase without paying LMI. We are looking at about the $500K mark.

He is keen on the idea of buying in that area with a view of me living in it but is naturally concerned about the huge difference in our available cash and what will be fair to him. I want the deal to be 100% fair to both of us. He likes the idea of sharing a mortgage and not taking on a whole one on his own.

With me buying a second property in QLD, do I/we avoid paying so much in stamp duty fees?

Any advice on how we can make this happen would be greatly appreciated.

 

[Peter_Tersteeg]

I don't think there's much you can do about reducing the stamp duty. I'm guessing that you've previously benefited from the first home owners grant so purchasing jointly with your brother won't really help. Stamp duty simply is a cost of buying property.

I'd be looking out for your brothers interests here, there's a couple of options:

* Your brother could purchas an investment property and you rent it from him. This solves your accomidations problem and gets him into the property market. The worst thing that could happen is that you're a lousy tenant and he's reluctant to hold you accounable. On the other hand you could be a much better tenant.

* Purchase the property jointly. You can get two loans against the property. You'll probably both be jointly responsible for each others loans, but by splitting them in two, it makes the 'responsibility' part much easier. Determining the size of the loans is fairly simple, especially if you purchase 50/50.
1. Determine the total cost of buying the property. ie. $400k purchase plus $20k stamp duty & costs = $420k total purchase cost.
2. Divide this by the ownership. $420k / 2 = $210k.
3. $210k is your responsiblity. Your brother's responsibility is $210k - his deposit = $110k (assuming he wants to put down $100k).

Loan split is $210k against you, $110k against your brother. Total loans are $320k which is an 80% LVR aginst the purchase.

You'd also need to determine what a fair market rent for the property is and pay your brother 50% of this as he's renting you his half of the property.