Parents home

From: Property Investor

I need your knowledge.

My parents want me to use their own home as security to purchase another couple of IP's for myself.
My dad is 67 and mum 6o years of age. They are not on the pension yet. Dad is still working Part time.
My question is, will the banks use the property as security?
Keeping in mind how close they are to claiming the Pension. Probably in a year or two.

Your advice and/or suggestions would be greatly appreciated.

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Reply: 1
From: Land Holdings

You said 'another couple of ips'. If you already own ips then why not use your own security as the base? I don't see any reason for using your parent's own home as a security. I think it would be grossly unfair. You should stand on your own two feet as it were. Even if it takes longer to build up a large portfolio you can do it safe in the knowledge that you are not risking your parent's hard earned money.
Please reconsider doing this even if they are all for it. The best you can do for them is become wealthy independently and then be there for them when they need you.

Just a thought. If your parents bequest you an amount of money as a gift that is different as it does not risk anything for them if it is not a huge amount say about 10k or so. That is the best I would accept from them especially at their point in their lives.

My advice is free. Take it or leave it.

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Reply: 1.1
From: GoAnna !

Hi Mannie

It is great that your parents are so supportive of your ips. I do however share LH's concerns. I am also left wondering - if they see ips in a such a positive light why don't they use their own equity to buy a couple of ips of their own?

GoAnna !
"Obstacles are those frightful things you see when you take your eyes off your goal."
-Henry Ford
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Reply: 1.1.1
From: Property Investor

That is the most honest and most passionate advice that I have received from this Forum.
Thank you both so much!

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From: En-lai Chan

Hi Mannie,

I tend to disagree with the previous couple of postings, with all due respect. I believe if your parents are offering equity in their home, you should use it. It's hard enough trying to get into IPs without equity. But if you do use their equity, you have to do the research and make sure that the deal that you are getting into is not going to blow up in your face and thus really risking your parents' equity.

One way of using their equity is to obtain a deposit bond or a bank guarantee to secure an IP. With a deposit bond no security is taken over your parents' equity. And in any case, upon settlement, the deposit bond expires and you've got your IP.

If you want to talk more about it, email me direct:

Good luck!

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From: Rolf Latham

Hi En-lai

OTP is one area where I would not touch with a third party security/equity.

If youre on the right part of the cycle and your OTP grows by 25 % over 2 years during construction - great - you wont need external equity.

The risk is that an OTP investment provides the potential for requiring more equity input than a buy now pay now deal. Equally likely to a 25 % increase in prices is a plateau or even a decrease in prices for property of any kind.


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