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Advice regarding buying house with siblings?

Discussion in 'General Property Chat' started by We3, 21st Nov, 2015.

  1. We3

    We3 Member

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    Hi, I am just seeking advise regarding our family home.

    The house in question is where myself and my sister and brother grew up in - my mother still owns the house as an investment property but I moved into it 4 years ago with my now 6 year-old son and I pay rent to mum. It's a beautiful old house in a good suburb, and mum has recently told me she plans to do it up a bit and sell it.

    I love this house a lot and am toying with the idea of asking my brother and sister to go thirds with me to buy it, and I could keep living here and pay rent to my siblings (neither of whom plan to ever move back to this area so would have no issue with me living here).

    It's only an idea so far and in reality I'm not sure they'd be keen on the idea but can't hurt to ask.... I couldn't get a loan for possibly a year yet either as I just started a new job but I could possibly draw mum out a bit.

    I know mum wants the highest possible price she can get on the house so we'd be looking at around 650-750k (?) or so.

    Any ideas on how I could take this proposal to my sis and brother, that sounds fair and reasonable for them as well as myself? The market is very good in this area at the moment (good suburb in the Illawarra area) but it's anyone's guess if property values will continue to go up...

    I've never owned a property previously and neither has my brother but my sister has an investment property. I am really into DIY though and have done various work on this house (built some lovely garden stairs, renovated kitchen (had new bench tops made up to specs and installed new appliances plus did some timber work, built deck, and other smaller bits of maintenance ). So I'd plan to do more at my own cost in future if the opportunity arises.

    Could something like this work for all of us??

    Thanks in advance for any advise [​IMG]
     
  2. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    I would advise against it.
    If you do proceed, the chances of it ending badly sometime in future are very high.
    The risk vs reward is terrible on this one.

    What's that saying about never enter into business with friends or family?
     
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  3. adrian_christian

    adrian_christian Well-Known Member

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    My sister and I a while back bought a townhouse in Artarmon once, around 2006 I think. She had just come back from working in London and desperately wanted in on the Sydney property market. I had just separated from my partner where I got cash and she kept the unit in Summer Hill (ouch, I know) so I desperately wanted skin in the game. We opted for a townhouse in Artarmon which she lived in with a shared renter, I kept renting in Crows Nest.

    Possibly the worst investment decision I've ever made, because it was entirely emotional.

    Fast forward a few years, new partner, new state, new IP opportunity, the conversation about selling out of my share of the TH to fund my next property purchase in Melbourne was not comfortable. I thought she'd have the means to buy my half out, but she couldn't so we had to sell it. We sold it for a nice profit, but in her eyes I forced her to sell her "home". We didn't speak for a few years after settlement. Things are civil now, she's ended up buying a unit in Hornsby instead of that townhouse in Artarmon, she still spitting chips.
     
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  4. WattleIdo

    WattleIdo renovating Premium Member

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    It may be that you are used to a family dynamic that doesn't carry forward into adulthood - not in Australia, anyway. Where once you were cute and everyone looked after you, as an adult it comes across differently. You might be better off settling for less which, after all, is what you can afford. Your mum wants to get a good price. How can she do that when selling to her own children?
     
  5. Azazel

    Azazel Well-Known Member

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    I don't have any experience in that scenario, decided not to buy with other people.
    But I reckon @monalisa and @MsAli might just have some ideas.
     
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  6. We3

    We3 Member

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    Sorry but I don't think that 'sold it for a nice profit' so you were able to buy a new home in Melbourne is a result of the 'worst decision you ever made'....

    Maybe the fact you didn't have a legal contract outlining when/if to sell in a set period was a bad decision though.... And your sister not talking to you for 2 years is pretty unfair of her, but I'm glad you're talking now :)

    Still, sounds like overall it was a great investment for you both!
     
  7. We3

    We3 Member

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    How high? I'm sure it's very common for children to buy/inherit property from their parents... Considering baby boomers own most of the investment properties in this country... I don't know many people who weren't helped into the market by their parents.

    Anyway, I just thought it could be a good way for us all to get into the market (my sister maybe not so much I guess) but my brother for sure as he could use his share of any equity to buy in Sydney where he lives in the future. I could add value to this house by fixing it up myself and could either buy them out in 5-10 years or sell?

    I'll give it more thought and ask around some people I know who might have advice in this area.
     
  8. moridog

    moridog Well-Known Member

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    I've said in earlier posts that my friend and I jointly purchased a property nearly five years ago now, I pay him half the rent it would bring now that I live in it, we haven't had the slightest bit of trouble and are still besties. Regarding inheritance, my siblings and I recently inherited from our parents and the executor, a sibling, refuses to tell us anything at all and I am off to the court this week to see if probate has even been applied for, let alone granted. I guess for me the moral is an investment with a friend worked out a lot better than the family inheritance.
     
  9. We3

    We3 Member

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    That's very unfortunate about your sibling controlling your parent's assets this way - I hope it is all sorted for you soon. A similar thing happened to my Dad, who's siblings cut him out of the process (because they never liked dads second wife!) recently when my grandparents died. It's not great when only one sibling controls everything.
     
  10. neK

    neK Well-Known Member

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    I reckon it was a terrible investment. While the money was good, his sister didn't talk to him for 2 years. Question is how much money do you place on family relationships?

    Purchasing jointly is possible, however all parties need to come with the same mindset and the rules of engagement need to be outlined upfront in a contract - eg. What happens when a party needs to sell etc.
     
  11. We3

    We3 Member

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    exactly, which is why I asked here! And made that exact point above....

    Okay well I will keep thinking about my options and consider if it is an option. I was wanting some actual advise on how it could quantify as an investment so I'll search elsewhere. Thanks.
     
  12. wylie

    wylie Moderator Staff Member

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    Your siblings would have a loan for one third of a house, and would receive one third of the rent. You would upgrade the house at your expense, and then have to buy them out at the higher price due to your having done the work. If you are happy with that, then at least you go in with your eyes open. But you also are at risk that one of them will force your hand earlier than you are ready to buy them out.

    I've done JV ownership with family before and it has worked. But the first time, my brother needed his funds back to build his own house. We made no money on that as we didn't hold long enough. I couldn't afford to buy his portion.

    Is there any way you can afford to buy it now? If your mother doesn't need the money for something else, would she consider gifting you one third share of the house now with some sort of documented purchase for the other two-thirds? I'm thinking along the lines of if she left this particular house to three children, you would get one third. You buy the other two-thirds and this is documented. I'm not sure how this could work and much depends on your family wealth, your mother's future needs, family dynamic etc, but just throwing it out there because you never know when a kernel of an idea will "click".
     
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  13. MsAli

    MsAli Well-Known Member Premium Member

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    It would depend on your siblings goals. What's in it for them? Since they have their own independence, what if they wamt to sell in the near future? How close are you to them?

    Unless you all had real estate or other business foundations to sustain this purchase without risk of selling, I wouldn't consider this option.

    Not to forget this will significantly impact your future borrowing due to joint liability. Speak with a great broker for guidance on the risks in this space.
     
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  14. SeafordSunshine

    SeafordSunshine Well-Known Member

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    Exit Strategy!
    How do you intend to buy out your siblings, when they want to 'pull out their equity'?
    something to think about!
    Perhaps see a solicitor to nut out some ideas?
     
  15. balwoges

    balwoges Well-Known Member

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    Just one word - DONT :(
     
  16. dabbler

    dabbler Well-Known Member

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    I say do not either for many reasons, and if your honest, do you really think it is the only house that is worthwhile in the area ?
     
  17. Ozzie in Texas

    Ozzie in Texas Well-Known Member

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    Agree. Don't. Save yourself from future arguments and aggravation.

    You already are thinking about DIY renovations, which would require their agreement and financial support. It's a too easy source of dispute - particularly given that you are living there.

    I hear you. It is your home. And you want to do everything you can to keep it. But it ain't your home. You rent. The landlord just happens to be your mum.
     
  18. hammer

    hammer Well-Known Member

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    Just as wealth can be measured not just with numbers but also relationships, family and happiness... So can risk.

    Its not worth it.
     
  19. Azazel

    Azazel Well-Known Member

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    This is the most important consideration.
    But of course some people think their situation is different and will push ahead regardless.