Property in child's name

Discussion in 'Property Investment - Other' started by Punter, 30th Jul, 2012.

  1. Punter

    Punter Member

    Joined:
    19th Mar, 2005
    Messages:
    3
    Location:
    Perth WA
    Hello

    My daughter (20+) is studying in Melbourne Uni and will be there for at least three more years. Currently she is paying half of the rent for the shared apartment which is around 1000 dollars a month.

    Thus the rent is about 24k per year for the two bedroom apartment. At 6% interest, an apartment of about 400k will cost the same.

    Based on my own situation, I see that people will have to send their children to university so there should be a long term demand / rent.

    I am not looking for any more IP in my name as I already have a few and I am now Non Resident for tax purposes. So I wanted to buy an apartment in my daughter's name. She can then use it as PPOR sharing it with other student. When she leaves the place then it can be rented out.

    I saw earlier posts on this subject. FHOG could be an added benefit.

    I have equity in my own home which I can draw down. But I dont want to do that.

    How to go about getting the apartment in my daughter's name? I tried my current lender who flatly refused saying the borrower must pass the cash flow test.

    My daughter does have a part time job not earning much as she is a full time student.

    Is there any set up I can use?
     
  2. Aaron_C

    Aaron_C Finance Broker

    Joined:
    11th Jun, 2011
    Messages:
    12,670
    Location:
    Melbourne, Victoria
    If the loan is to be in your daughter's name only then yes, she has to be able to service the debt, no matter how small it is. The only way to get around it is if you draw the equity from your own properties and gift it to her, or if you go on title with say a 1% stake (she with a 99% stake) so you can help service her loans and borrow money for her.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

    Joined:
    29th May, 2001
    Messages:
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    Location:
    Melbourne
    Aaron is correct. You can't guarantee the repayments of a third party, the only way around this is for you to have an ownership interest in the property. However you'll find that most lenders will want your stake to be at least 10% (not a mere 1%).

    Also keep in mind that this would likely disqualify for daughter for the first home owners grant.

    Another way to do this might be to draw equity from your properties and gift this cash to your daughter so she can purchase the property outright.
     
  4. matto_

    matto_ Member

    Joined:
    19th Apr, 2010
    Messages:
    992
    Location:
    Melbourne
    what are the pitfalls of gifting the cash? Would this impact a childs potential for govt ben's?