Hi all,
Long time lurker, but first time poster. Have learnt a lot on these forums!
I have a complex question. My parent's own their own PPoR (5 year old house) valued at $1.5m with a loan of $530 000. They meet repayments on this loan comfortably but not much more to be able to invest or save.
I'm 25, living out of home have just bought an investment property valued at $400 000 (loan at $350 000) and managing that comfortably. I earn about $120 000 p.a. which will rise by about $30k every year.
We (as a family) would like do some more investing and would like to unlock some equity in this house. I've been doing a bit of research and thought of the option of buying the family PPoR at a reduced rate (say $900k) and then renting the house back to parents as an IP.
With a loan of about 900k, the loan repayments would be $4125 p/m. Under this situation, my parents would be paying market rent around $3200 p/m and I would cover the remainder. Just a rough estimate (@5.5% pa)
The pros for this as far as I can see:
- tax breaks (negative gearing/capital works deductions/depreciation), works well given my income
- unlocking equity for me to able to invest in the future and lend to my parents if required
- release of 300k equity/buffer for my parents to invest further
- keeping a $1.5m well located and appreciating asset
- having my parents as tenants, makes it easier (never intend to sell this home)
Cons
- mixing family and business
- paying ~70k in stamp duty
- buying at a reduced rate, means 600k in cash that my parents won't get, but obviously will borrow this out further if needed
My parents have helped me out a fair bit, and my philosophy is to help them out in return. I know the other options are to downsize, but that involves moving, a fair amount of legal/conveyancing/stamp duty issues both selling and buying. The option of having my parents borrow more equity has been looked into, but the banks are not willing to lend any further.
As far as I've looked into this method keeps everything else the same, just involves shuffling money around to make it work better. Sorry for the essay but I wanted to put this to the wise folk on here to see if I've missed anything.
Any thoughts and advice are appreciated
Cheers
Long time lurker, but first time poster. Have learnt a lot on these forums!
I have a complex question. My parent's own their own PPoR (5 year old house) valued at $1.5m with a loan of $530 000. They meet repayments on this loan comfortably but not much more to be able to invest or save.
I'm 25, living out of home have just bought an investment property valued at $400 000 (loan at $350 000) and managing that comfortably. I earn about $120 000 p.a. which will rise by about $30k every year.
We (as a family) would like do some more investing and would like to unlock some equity in this house. I've been doing a bit of research and thought of the option of buying the family PPoR at a reduced rate (say $900k) and then renting the house back to parents as an IP.
With a loan of about 900k, the loan repayments would be $4125 p/m. Under this situation, my parents would be paying market rent around $3200 p/m and I would cover the remainder. Just a rough estimate (@5.5% pa)
The pros for this as far as I can see:
- tax breaks (negative gearing/capital works deductions/depreciation), works well given my income
- unlocking equity for me to able to invest in the future and lend to my parents if required
- release of 300k equity/buffer for my parents to invest further
- keeping a $1.5m well located and appreciating asset
- having my parents as tenants, makes it easier (never intend to sell this home)
Cons
- mixing family and business
- paying ~70k in stamp duty
- buying at a reduced rate, means 600k in cash that my parents won't get, but obviously will borrow this out further if needed
My parents have helped me out a fair bit, and my philosophy is to help them out in return. I know the other options are to downsize, but that involves moving, a fair amount of legal/conveyancing/stamp duty issues both selling and buying. The option of having my parents borrow more equity has been looked into, but the banks are not willing to lend any further.
As far as I've looked into this method keeps everything else the same, just involves shuffling money around to make it work better. Sorry for the essay but I wanted to put this to the wise folk on here to see if I've missed anything.
Any thoughts and advice are appreciated
Cheers