Hey guys.
My sister-in-law from South Africa wants to invest in Australian property. She’ll provide the cash but the not cashflow. My wife and I have very little spare cash of our own, but just enough cashflow to gear her deposit up to about 85% LVR, but are dying to buy another IP because we can tell the market’s ripe.
I heard that with the complications of foreign law, we could be looking at $10-15k in legal fees to set up a proper International Joint Venture. It's probably going to be hard enough just getting the money out of South Africa. So we’re looking at ways to make it simpler, and this looks simplest:
We agree on a % to split the profits. At the end of the day we both get back the money we put in, plus our % of the profits (equity growth + rent). Sis puts her money in our account, we borrow & invest completely in our name, then when she wants her money back we harvest her equity from our bank, and pay her back the cash. (We intend to hold it forever.) If we want to harvest equity for our next IP, we probably have to ask her first, to check that she doesn’t want her share any time soon, as it’s likely that the bank wont let us harvest equity too often.
What problems do you see? Of course we'll need to get it watertight legally, but Rob Balanda says it's best to get all the possibilities nailed down before you see a lawyer.
Will we be stuck having to harvest equity together and invest in every subsequent property under the same arrangement? If all goes swimmingly that would be fine but it’s worth having a viable get-out plan. What if she moves to Australia once she’s a millionaire and we have to move her share into her name? Aside from giving her the cash from our equity, I cant see any other option to avoid CGT.
We’ve read the recent API mag articles on JVs, and bought the Rob Balanda CD, but we’re having a hard time finding anyone who’s actually done a JV like ours before.
My sister-in-law from South Africa wants to invest in Australian property. She’ll provide the cash but the not cashflow. My wife and I have very little spare cash of our own, but just enough cashflow to gear her deposit up to about 85% LVR, but are dying to buy another IP because we can tell the market’s ripe.
I heard that with the complications of foreign law, we could be looking at $10-15k in legal fees to set up a proper International Joint Venture. It's probably going to be hard enough just getting the money out of South Africa. So we’re looking at ways to make it simpler, and this looks simplest:
We agree on a % to split the profits. At the end of the day we both get back the money we put in, plus our % of the profits (equity growth + rent). Sis puts her money in our account, we borrow & invest completely in our name, then when she wants her money back we harvest her equity from our bank, and pay her back the cash. (We intend to hold it forever.) If we want to harvest equity for our next IP, we probably have to ask her first, to check that she doesn’t want her share any time soon, as it’s likely that the bank wont let us harvest equity too often.
What problems do you see? Of course we'll need to get it watertight legally, but Rob Balanda says it's best to get all the possibilities nailed down before you see a lawyer.
Will we be stuck having to harvest equity together and invest in every subsequent property under the same arrangement? If all goes swimmingly that would be fine but it’s worth having a viable get-out plan. What if she moves to Australia once she’s a millionaire and we have to move her share into her name? Aside from giving her the cash from our equity, I cant see any other option to avoid CGT.
We’ve read the recent API mag articles on JVs, and bought the Rob Balanda CD, but we’re having a hard time finding anyone who’s actually done a JV like ours before.