To add a name to the contract or not?

I made an offer on a property over the weekend and the contract is now with my solicitor. My brother and I have agreed that we would go 50:50 on the property like we did about 5 years ago. The property is $650K.

However, from financing point of view, I need to know whether it is best to add my name to the contract (on the title) before signing the contract.

So here is the background:

Me, married with one child:
PPOR: value $800K with $500K loan in joint names with hubby
Combined income: $60-70K pa gross
Income through parents tax free status: $20-36K pa gross. We distribute our business income by way of franked dividends to my parents as they are both retired and do not have any other taxable income.
Cash, Shares & Managed Funds: $150K


Brother:single with no kids
IP: value $800K with $400K loan
Income: $150-160K pa gross
IP income: $30K pa gross
Cash, Shares & Managed Funds: 250-300K

Our Plan: We plan to purchase more properties together. However, we have agreed after a certain period (3-5 years) one of us would buy the other out as we did with our first purchase together about 6 years ago. We would like to purchase again together in about 2-3 years time when this property becomes cash-flow positive.

Legal Danger: We understand that our circumstances may change, and one of us may get into financial difficulty but we have our parents who have said that they will alter their wills to compensate anyone who may be taken advantage of.
If the property goes in my brother's name and he gets married we plan to lodge a second mortgage or caveat on the property to protect my/our contribution to the property.

So from a financial point of view, not legal, is it best to add my name to the contract or not?
 
Have u comsidered avoiding both stamp duty and cgt by just buyi g in one name instead of 2. Would help serviceability too
 
A person without title would have difficulty in defending their right to title where a person named on title has a presumption of being a owner. Of course depending on what happens BOTH positions may be a problem.

The decision NOT to be on title should be supported by legal advice. You cant argue you don't want to be on title one day and then in a few years seek to secure an interest from a spouse etc and argue you contributed equity.

If you want a trust discuss trusts with a solicitor....That is after all what you want to do. Your manner of allowing your brother name on title sounds like a trust. So why not use a trust ? It may also address the duty issues later if its a unit trust. And land tax if its a NSW Land Tax Unit Trust.
 
Thanks Terry and Paul.

My husband and I have problems borrowing money because we are at the lower end of income even though we are good savers. We do not have a lot of prospect of earning more than $150K combined gross in the near future and we will on average earn about $100K combined gross for the next 10 years, unless something drastic happens.

However, in saying that we would like to keep acquiring property but serviceability limits us. My brother also on the other hand would like to invest in property but has limited time because of his job and does not like to be over stretched with mortgage as he is a cancer survivor and does not want life to be too stressful.

I ask this question because I am confused as to what to do.

I know that my legal interest would be protected, if I add my name to the title, and I would be able to claim depreciation and whatever up to the percentage of my ownership. But at the same time, I have heard from experienced investors that by putting my name on the title, my serviceability would be limited for future acquisition and I don't want this to happen. If my or his serviceability is limited in the future, it means that I cannot acquire more property and I am willing to accept the fact that more costs may be involved when transferring title, as Terry says, in terms of stamp duty and capital gains tax.

If we buy in my brothers name only, because he is the only one who is capable of getting the loan easily with his income and asset base, he would be able to pay me out after a certain period like he did with the first purchase. But it will be very costly if I decide to buy the property off him later down the track- 100% stamp duty & capital gains tax must be paid.

I have carefully considered hybrid or discretionary/family trust for acquiring property but I am not sure whether this will be beneficial in our situation because we have different investment goals. Our investment property goals align only in the short-term.

My brother likes to buy established properties and bases his purchase on rental return. Capital Gains is a bonus to him. As long as keeping the property after putting 20% down as deposit does not cost him anything he is happy to keep because rental return in a few years down the track will be more than the interest payment.

While as my husband and I have a different property goal because we are low income earners. We would like to add value to the current land either by renovating, sub-dividing or re-building. We have experience of doing this in another country but do not have enough capital to do this in Australia. My brother does not like to take risk in this sort of property venture. And without him being the guarantor or director of the trustee company of the trust I don't think the trust will be able to borrow sufficient money for us to do what we want to do.

So with this extra information would it be wise for me to add my name to the contract before signing?
 
I have carefully considered hybrid or discretionary/family trust for acquiring property

Have you considered a unit trust? This will give the flexibility of transferring units at a later date with no or less stamp duty than transferring the land.
 
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