Advice Required - Another Thread, I know.... Mixing Business with Emotions

Hi PC,

I’ve been toing and throwing about this topic that’s been eating away at me as I can’t answer it myself. Given now is crunch time to make movement, I’m hoping someone can provide advice and/or experiences with the below:


Toongabbie PPOR – Co-owned with brother

• Market Value - $1.05-$1.1M current (potentially more)
• PPOR Loan - $260k combined
• Details: 857m2, 32m frontage, GF applicable, 4 bed, 3 bath, 3 car garage, Main Street facing, 4.5 min walk to station, 6 min walk to shops, 8 min walk to schools, and 10 min walk to T-Way

Campbelltown IP – Co-owned with Partner

• Market Value - $570k+ current
• IP Loan - $590k I/O combined – 20% secured by PPOR
• Details: Recent purchase, 623m2, GF Applicable, 3bd, 1 bath, 2 toilets, 0 cars (GF replacing garage), good location.

My recent purchase for C'town has been a fixer-upper + build GF. We have recently almost finished reno’s on main dwelling and about to let out, and in the interim build the GF this year.

Post planning to this, my brother has brought forward an idea to build (and finance) a GF at our PPOR + borrow another $50-100k max to finish renovations of PPOR such as driveway (currently crushed gravel), landscaping, entertaining area at back, removal of trees and some touches inside.

With the addition to GF in IP, we will approx. be $400 p/m cash flow + (after expenses)
With the addition to the GF in PPOR, we will be approx. $100 p/m cash flow + (after PPOR HL, $100k Reno Loan and GF loans)

So theoretically, I’ve got 50% of $500 p/m to share with no mortgage left to pay on either.

Crunch-line:
Problem is, is it worth me doing so as more than likely to be married within a few years, move out from shared home and purchase next PPOR?
Existing PPOR will stay to brother and he will cover utilities. I can’t seem to see how it will balance out after a few years, other than liabilities removed for these.

I'm guessing there is emotional drivers behind this too

 

I'd be making plans to sever ties with the brother and your co-owned investments. New life is with the one you're going to marry - so plan to invest longer term with partner.

 

I was going to say the same with Alan. Waste of a main residence CGT exemption too.

 

How do you own with the brother? Joint tenants or tenants in common?

 

You are running a business with your brother. You should have a clear understanding of your rights and entitlements as a business partner. This will include how you can exit the relationship - and you can use an option of a forced sale, forced purchase a combination or something a bit more exotic.

At some stage either of you will likely find your investments impacted by the action of the somebody else other than your brother and you. When this happens you need a clear understanding of how to deal with it in advance.

Make sure their is equalisation between your brother and yourself. You do not want somebody coming back in a few years time with their hand out for something extra.

And don't forget the main residence exemption should be maximised with your investment strategy.

 

Hi Terry,
Tennants in common in equal shares.
Loans are currently split per person with both names as borrowers. Mobile lender advised to amend the borrowers to extend servicing capacity
My loan - Borrower: Me, Gtee: Brother
His Loan - Borrower: Him, Gtee: Me

If we had the house valued prior to build, and then at any time price increases will the CGT only apply to the portion of land used for GF and the value increase between valuation and time of sale?

Selling the PPOR will be quite difficult for a number of years.

What methods can I apply to secure us going forward?

 

Your mobile broker's suggestion may be good - split the loans with each guaranteeing the other, but this has no effect on anything much really. Your borrowing cap would still be the same and risk the same.

To 'secure' you going forward consider selling your share to your bro (or vice versa).

TIC is good as you can leave your interests separately. But imagine you died and left your share to your spouse - he or she (or them) would own the property with your brother.