Would B benefit from supporting A's investment



From: Nic Johns

Does person A purchase his 1st investment property worth $300,000-a 2 bedroom property, with person B's assistance? Would the following be financially beneficial to person B?
A has about $14,000 deposit. But A wouldn't be able to service the loan on the $300,000 property because he doesn't make enough money.

Person B has offered to inject $40,000 of his cash into A's $300,000 property as an extra deposit bringing total dep to $54,000. They would therefore become partners.

But A's house which they are both living in is worth $800,000 and has mortgage of $100,000. Outgoings on the $800,000 property and living expenses for A and B are $1500/wk. B is paying about $1400 of the expenses because A can only afford $100 wk into these expenses. After injecting $40,000 into A's property, B would only have $40,000 cash in bank and about $200 after tax income/wk to pay the $1400, plus whatever expenses are associated with the $300,000 investment.

The idea is that B would use any rental income available from the $300,000 property and A would benefit from the capital gain in future.

In 1 year the $1500 would be reduced to $1300 because A will vacate the house therefore reducing expenses of B. A would then also be earning enough to pay $200 of the $1300. But B would pay the remaining $1100/wk plus expenses from the $300,000 property. B would pay this using an income of $200/wk after tax, and available rent from the $300,000 property.

Would it be beneficial to B to inject the initial $40,000? The primary purpose would be to provide B with ongoing income. Secondary purpose would be for A to benefit from capital gain.
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Reply: 1
From: Robert Forward

Personally, and don't take offence if your person A or B.


There is far to much complications in what you've put in. Start thinking of some "what if's". I'm rarely a negative thinker but this would have me very worried.


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