Domestic arrangement strategy

Discussion in 'Investment Strategy' started by kingstreet75, 27th Feb, 2020.

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  1. kingstreet75

    kingstreet75 Well-Known Member

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    A question about a strategy I am mulling.
    My brother cares for my elderly father in our hometown. They live separate.
    My brother's lease is up and will move on as they are subdividing and doing construction there.
    It's in Hamilton, western Vic. REntal properties are actually not that cheap there. Supply is low.

    My Dad will lend me 20,000. I would put in 18 and buy a 200,000 property for my brother to live in, while he cares for Dad. Then I could knock some of the rent off as domestic arrangement.

    My salary is 60k a year. So assuming I would ordinarily get taxed 30% on any capital gains from rent, I could offer my brother 30% off market rate and would be a win win. I know I can't claim any tax lessening in this arrangement.

    I know financially its not smart but then again, I would not have this 20 grand ordinarily so I see it as family support.
    Just trying to help him out and my Dad, create some stability for them.
    Any advice appreciated. Never bought a house, just muddling my way through it.
     
  2. thatbum

    thatbum Well-Known Member

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    Why not just pay them money instead? If they need stability, negotiate a longer term lease.

    I find these sort of family financial arrangements unnecessarily messy - both in legal terms and personal relationship terms.
     
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  3. Trainee

    Trainee Well-Known Member

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    is it really worth buying a house there tho?

    one option is generating income from the deposit, give that to him after tax.

    how much is 30% rent?
     
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  4. kingstreet75

    kingstreet75 Well-Known Member

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    Unfortunately they are too proud to accept any money from me. I have tried in the past. Thanks for the advice. I think I agree with you.
     
  5. kingstreet75

    kingstreet75 Well-Known Member

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    Thanks for the reply. Usually a 3 bedroom house will rent for around 270 a week. 30% of that is 80 dollars a week
     
  6. Trainee

    Trainee Well-Known Member

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    38k in franked shares might be 3k a year including franking credits and assuming no tax.

    if they are willing to accept cheaper rent, seems the same. Frame it to your brother as you want to help your dad, and vice versa?

    shares have their own risk though, but so does property.
     
    Last edited: 27th Feb, 2020
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  7. kingstreet75

    kingstreet75 Well-Known Member

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    Part of the problem of being a renter is the continual moving on, when the owner happens to want it sold and your lease is up. It's ridiculous how hot Hamilton and Ararat market are at the moment for the relative employment opportunities around.
    It's happened a few times. That was why I considered buying a place.
    Also figured I can grow enough food in a decent garden to support family.