$200k from father in law

Why $1? Half of nothing is nothing. Pay him nothing.

 

I wouldn't do it. It basically sounds like you would be investing his dollars for him and 'possibly' making a cut, key word 'possibly'
Better off doing your own thing. If it doesn't go to plan you would have that on your conscience

 

My gut feeling is that if he is genuinely wanting to loan you the money to further the investing path, then structure it that way - as a loan.

The interest rate would need to be attractive for him of course, but unless you have reached a DSR ceiling with the Banks, and if you can access a loan of $200k yourself, then it's not really worth the bother.

 

Nope. I wouldn't take that offer from the bank either.

 

Hey Brian,

If your FIL is willing to help out, do you know if he has equity in any existing property (ie. PPOR or other IP). What you could then do is see if he would be willing to secure your IP loans against this equity.

I did exactly this with my mother PPOR and was able to push through a pre-approval with one of the big 4 banks. I have managed to do this without having to put anything down and being able to borrow 104% of the sale price. The catch is, if you chose a property that you have to sell for some reason AND the sale price is lower than purchase (ie. can't pay the mortgage) then your father could be forced to sell his property or come of the with shortfall.

If you select wisely and find a property that increases 25ish% sometime in the next 5 years you could re-finance and remove the securitization on the original property.

This is how i purchased my very first IP property. And now how I have managed to get pre-approval for my soon-to-be IP4 & IP5

Note: bear in mind this is what worked for me and you will need to do your own due diligence that suits your individual needs.

Regards,
QS

 

Sounds like a mess at tax time.
Marg

 

To

To be honest now that I think about it he is probably just thinking more about himself. By the sounds of it he is just looking to get a return on his money instead of just leaving it in the bank, and he is guaranteed to get his $200k back in 5years.

 

Sounds like a mess full stop.

 

If he's got equity he wants to spend, what about a JV? 50/50 or something? Or even a development between the two of you - that way there is a set exit (if he actually needs the cash back in 5 years).

Obviously the normal warnings about your personal servicability with a JV (50% income, 100% liability for the loan).

 

Like mentioned earlier on, he isn't that experienced with property investments. So I don't think he is intentionally trying to do anything other than make some $$ for himself and he might be hoping you and your wife could make some too. But obviously it isn't as easy as that. His offer leaves you very short in the servicing department as half the rent is going to him. Also the 5 year deadline isn't enough time to make serious cash with low risk with an exit plan including exit costs/taxes. Well maybe its enough time for the experienced, but you gotta be pretty on the ball for it all to go in your favour in that short timeframe. Not to mention legal ramifications if the crap hits the fan.

 

I agree 100%

 

Formalised joint venture with a short time frame is probably more desirable!

 

I'm sure he means well, but take it from me. Family & finances DON'T MIX!

 

Sounds like something my father would say. Not thought through, and confusing his desire to see you and the mrs do well with his selfishishness and grandiosity. The time-frame and the conditions are ridiculous.
Just smile and hand him another beer. He needs to put it into super or a mutual fund.

 

poison FIL, inherit cash, don't need to payback then, buy 2 200k houses, profit

 

With his 200k cash? 10% deposit and costs on 1.5mil worth of houses

 

Why don't you ask FIL if he will take 4% on his money (20% or so better return on what he will get gross in a bank) and he can have half back (100k) in 5 years time). This gives you time to let CG increase/better reval through reno/Int Rates going down and asset price going up/winning Lotto allow you to better your position. Win - win. You get a not-free-but-cheap kick and FIL gets a few bickies ahead of the market.
Unless everything goes pear-shaped and next Christomas could be a bit awkward (or not, depending on your family dynamic...).

 

I wouldn't do it.

The 200k back in 5 years is a very short time and you lose 50% of the rent but still have 100% of the expenses.

If it was 200k back in 10 years it might be a more even deal but 5 years is really short.

Think about your 200k you can buy a place at 80% LVR for 1M, however the stamp duty would be about 30k just to start off with, plus legal, inspections etc etc make it about 40k all up for purchasing.

Then on top of this a loan of 800k @ 4.5% would be $36k in interest (48k @ 6%).

If you managed to get 5% yield on the property that would mean you get 50k p.a. in rent but your FIL wants 50% so you only get 25k however your mortgage is 36k (and could be 48k).

Seems to one sided this transaction.