Going 50/50 with parents & I will live in the house - pay market rent

Discussion in 'Financial Planning' started by 2jzzzz, 28th Apr, 2019.

Join Australia's most dynamic and respected property investment community
Tags:
  1. 2jzzzz

    2jzzzz Active Member

    Joined:
    5th Aug, 2015
    Posts:
    25
    Location:
    Melbourne
    Hi,

    Just wondering how anyone else has gone about buying a house 50/50 with another party and then one of the parties lives in it.

    My example is say there is a house for $500,000. Each of us goes in for $250,000 to purchase.

    My 50% mortgage repayment would be approximately $220/w to service for myself.

    But then I will live in the house.

    I will be servicing the loan repayments but also need to pay what would be market rental rates.

    Assume the average rental return is $400/w.

    How would you structure the payment of the "rent"?
     
    2jzzzz, 28th Apr, 2019
    #1
  2. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    42,000
    Location:
    Australia wide
    Pay them rent as if it was a separate property.
    But why are you wanting to do this?
     
    Terry_w, 28th Apr, 2019
    #2
  3. 2jzzzz

    2jzzzz Active Member

    Joined:
    5th Aug, 2015
    Posts:
    25
    Location:
    Melbourne
    I'd only be paying them half of the market rent, so it'd be me servicing my loan, plus a $200 "rent" payment to my parents.

    Why I would do this? It's something along the lines of a condition of my current employment. I recieve rent assistance on the proviso I do not own where I am based. Plus I don't want to be solely resonsible to repay a $500,000 loan at the moment.
     
    2jzzzz, 28th Apr, 2019
    #3
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,653
    Location:
    Gold Coast (Australia Wide)
    50 % ownership will show on title though ?

    ta
    rolf
     
    Rolf Latham, 28th Apr, 2019
    #4
    QldKoolies, Marg4000 and Terry_w like this.
  5. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    10,346
    Location:
    Australia
    And your plan meets these conditions how? Why not just rent, take the rental assistance and buy an ip elsewhere? Why involve your parents here?
     
    Trainee, 28th Apr, 2019
    #5
  6. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,248
    Location:
    Sydney or NSW or Australia
    You will also lose any FHOG as your parents already own a property.
     
    Last edited: 28th Apr, 2019
    Scott No Mates, 28th Apr, 2019
    #6
  7. Terry_w

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

    Joined:
    18th Jun, 2015
    Posts:
    42,000
    Location:
    Australia wide
    Also full main residence CGT exemption won't be available
     
    Terry_w, 28th Apr, 2019
    #7
  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,536
    Location:
    Sydney
    Depending how the loan is setup the loan could be 50% deductible or 100% deductible.
    When the ATO sets its sights on these arrangements they tend to apply a fine filter to all the issues. One little issue and it snowballs. Needs to be diligently planned and maintained.
     
    Paul@PAS, 29th Apr, 2019
    #8
  9. QldKoolies

    QldKoolies Well-Known Member

    Joined:
    28th Sep, 2018
    Posts:
    255
    Location:
    Brisbane
    If you are ADF, you are only required to hold any legal or equitable interest in the home
     
    QldKoolies, 9th May, 2019
    #9
  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,536
    Location:
    Sydney
    I had a number of ADF clients whose parents purchased a rental that they live in and ADF pays the rent supplement to the member
     
    Paul@PAS, 16th May, 2019
    #10
  11. QldKoolies

    QldKoolies Well-Known Member

    Joined:
    28th Sep, 2018
    Posts:
    255
    Location:
    Brisbane
    Its ok if the ADF member doesn’t own any of the property
     
    QldKoolies, 16th May, 2019
    #11
    Paul@PAS likes this.
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,536
    Location:
    Sydney
    Paul@PAS, 16th May, 2019
    #12
    QldKoolies likes this.