Advice re selling IP tenants in common, sell or keep

Discussion in 'The Buying & Selling Process' started by moridog, 26th Dec, 2016.

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  1. moridog

    moridog Well-Known Member

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    Hi, on holidays with my bestie and tenant in common for an IP in Padbury. This is my only IP although I have now built a granny flat adjacent to my PPOR. My bestie lives in this GF and I keep all the rental income for the IP, with me so far? We have been talking about whether to sell it now the rezoning is done. Obviously, the market is terrible but we would not lose money and I cannot raise enough money to redevelop, the block is very steep, but has glimpses.
    The issues as I see it is that I am having difficulty raising any more money to buy anything and it is a good time for bestie to buy something independently. the mortgage is underwritten by my property and bestie has no other assets but a sound employment history, good super, and solid repayments with no issues. The IP has been rented to a neighbour for below market value but self managed and no issues at all, neighbour anxious to stay on. If we could both buy something in this market I suspect it would negate the lack of real CG for the IP. Bestie close to retirement, I am not but would like to do other things such as use granny flat for short stay accomodation, it is in a good location. I would really like some advice on this as I seem to go around in circles. We are both managing the repayments with no problems and the house has not caused any problems since being rented but as I said, now re zoned area, house needs total refurbishment and can't see it being worth spending anything on. Thanks.
     
  2. wobbycarly

    wobbycarly Well-Known Member

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    The arrangement sounds complicated, and then if bestie is close to retirement, how will they qualify for a loan with "no other assets"? Unless "good super" will cover it? But I'm not up with super and lump sum vs pension payments and how much bestie will get on retirement.
     
  3. moridog

    moridog Well-Known Member

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    Well, There is already now a proven track record of repayments so if retirement is delayed until a loan is secured and the super used to prove capacity I would have thought that the track record was sufficient to obtain another loan of the same value.? (260 k) so, not sheep stations.
     
  4. Marg4000

    Marg4000 Well-Known Member

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    Maybe a good idea to have a chat with bank or broker to ascertain whether friend can borrow, conditions and how much. Better to know in advance in case it affects decision to sell.
    Marg.
     
  5. moridog

    moridog Well-Known Member

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    Good idea Marg, I think there are a couple of Perth brokers on this forum.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes sounds complicated and messy. What do you do tax wise?

    Sounds like your property is used as security which is dangerous.

    I would try to get out of it asap. sell, or buy him out/he buy you out.

    But before you do that have you worked out how you will split the proceeds and the tax consequences?
     
  7. moridog

    moridog Well-Known Member

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    We've owned it for six years, tax wise our affairs are separate and we each claim a half allowable deductions, I imagine we would each pay a half share of capital gains tax which is okay. We would split the proceeds after any deductions pertaining to the sale and each pay out our own loans. The mortgages are clear that we are tenants in common, not joint tenants and yes, it is secured by my existing property. There is no rift or breach of trust, it is simply time to explore whether it is kept until the market improves or sold to make separate investment decisions (for me) and a PPOR ( for them) which would seem wise approaching retirement.