Strategy for Building Shared Holiday Home.

[MiQu]

Hi

My parents have a nice block of land in Sunshine Coast, which they have had for many years.

My brother & I are thinking of borrowing to build a holiday home for them as they won't be able to afford it. It would be used by them maybe 2-3months a few weeks (and maybe 2 weeks by us as holiday home) a year. We plan to rent it out when not using it, pay interest & maintainance.

Roughly we thought we split it - 50% parents and 25% bro & I, but only my bro & I would take out the loan as parents would provide the land.

We are looking at the best way to do this. If we were to do it in a Trust (with 4 shares) then I presume they would have to pay CGT & Stamp duty to sell to trust, which would be very expensive.

Would a joint venture or partnership of some sort be an option? Any other suggestions would be appreciated.

Thanks.

 

[Qlds007]

Miqu

There are many variables here so it is not a straight forward answer.

I assume that the land is in their sole name so any changes to the structure of this will trigger additional Stamp Duty and possibly CGT.

There are a couple of options which would include the loan being taken out in their name although you and your brother look after the repayments.

This has a couple of disadvantages in that rent will be added to the income (may cause a problem down the track when it comes to pension entitlement) and secondly the interest and other expenses will be their deduction (again issues here).

You would probably need to work backwards on the eventual goal for the property to establish the best way forward.

As i say not a straight forward answer but one that could be overcome with some additional information.

 

[MiQu]

Hi Qlds007
Thanks for the response.
Yes the land is only in the parents name and they are retired.
We would prefer to take the loan in my bro & my names, for interest deductions and also in case it becomes negatively geared.
Is there a way to do a 4 way joint venture or partnership?
Cheers.