Going half in a IP

Discussion in 'Loans & Mortgage Brokers' started by MyDarlinghurst, 27th Dec, 2017.

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  1. MyDarlinghurst

    MyDarlinghurst Well-Known Member

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    What is the process of I wanted to go half in a Studio Apartment with a friend and get finance same with him.

    For e.g. Studio Apt 440k ...so it will be 220k each.
    Plus stamp duty

    My friend rang a mortgage broker on here but he apparently was telling me how he owned units in Brisbane etc but didn't call my friend back.

    We both have the 20% deposit
     
  2. hobartchic

    hobartchic Well-Known Member

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    Find a lawyer but I have seen this end badly. I would buy a property separately if you can afford it.
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    You both apply for a loan jointly, sign a contract of sale and settle as per normal.

    but you should each seek legal advice on the consequences of joint ownership and get advice on how to structure it - joint tenants or tenants in common etc.

    If you don't want to be on a joint loan together, and jointly liable for the whole debt, then you could separately borrow against other property - if you have any
     
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    messy

    If this is a long term debt and investment, and you arent going to be doing everything else together financially from here on................ then the joint and several liability will not be an issue

    Though

    Life is what happens to you while you are making other plans....................


    ta
    rolf
     
  5. MyDarlinghurst

    MyDarlinghurst Well-Known Member

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    Yes I would rather he borrow his half and I borrow my half
    We will have to see a lawyer about it.

    Is it messy? Surely there's guys on here in IP that are in 2 or groups??

    I will get a loan easy but it' just working out how to do it ?
    Do I start separately with a mortgage broker?
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    As TW said, if you dont need the property for security, then borrow against another and your loan stays yours and your investor partners stays theirs.

    There are some things like CBA "property share", in truth, in most cases its smoke an mirrors.

    a handful of lenders dont mind the joint and several liability issue, but going forward - its best to avoid

    ta
    rolf
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    What is your exit plan (do you/he buy him/you out, do you both sell, do you make an offer at $ and he has first right of refusal?)
     
  8. The Y-man

    The Y-man Moderator Staff Member

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    If it makes it any easier, take a view from the lender's standpoint.

    If I was to lend you money for half the property, and you turned out to be a bad borrower (i.e stopped paying interest etc), it is much harder for me as a lender to sell the property and get my money back - as there is another party jointly owning it, and another lender with a mortgage over it (either owner or lender may refuse to let me sell it to recover my money).

    Yes people do buy property in groups - one way is for a unit trust to be set up, in which the investors buy "units" (think of them as "shares"). The trust goes and borrows the money. Decisions are made by voting of unit holders.

    The Y-man
     
  9. Medine

    Medine Well-Known Member

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    Hi Mydarlinghurst,

    My thoughts are to be very cautious before you proceed and that will save the messiness.

    I have seen a few joint property projects work if the timeframes and plan Bs are set up before hand.
    Where both parties agree and acknowledge with signatures that you are going to keep the property for X years and then sell and if that doesn't work out then you will do X until such a time as you do Y.

    But you also need to be realistic as to the nature of property.
    You can't sell half a house.
    And owning jointly is a veto proposition (not a consensus)
    So if one of you gets divorced, married, has kids, a promotion, a retrenchment, etc, and needs their money back they will want to sell.
    And as you can't sell half a house the other will be forced to sell whether they want to or not.
    And that's just how property is.

    So go for the scout's rule and be prepared :)
     
  10. lost nomad

    lost nomad Well-Known Member

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    @Terry_w in the OP's example, what kind of equity would they need in another property to borrow against it? Is this Cross Coll? Is there a minimum time frame that the other property needs to be in your portfolio before the bank accepts it?

    Thanks
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Any entity

    For example
    A and B want to buy Property X for $400,000 jointly - either as TIC or JIT - no difference to this example

    A has a Property at Smith Street worth $500,000 with a loan of $100,000
    B has a Property at Jones Street worth $500,000 with a loan of $100,000

    A goes to her bank and gets a loan of $200,000 secured by Smith Street - this is in addition to the existing loan of $100,000
    B goes to her bank and gets a loan of $200,000 secured by Jones Street - this is in addition to the existing loan of $100,000

    They each use $200,000 of borrowed money to pay for Property X.
    Property X is unencumbered
    Neither Smith St nor Jones St is cross collateralised because each loan is only secured by 1 property.

    If A doesn't pay the $200,000 loan repayments the lender will come after the security property which is Jones street - without it affecting the jointly owned property. If this is not enough to pay the debt then the jointly owned property could eventually be attacked, but only A's share.

    Similar for B
     
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  12. lost nomad

    lost nomad Well-Known Member

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    Great, thanks for that!
     
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  13. dabbler

    dabbler Well-Known Member

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    I think we have all explained many times the why nots, but if you are ready to wed someone through finance, I am now leaning toward saying to each new person.....go for it......
     
  14. Boston george

    Boston george Active Member

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    You will have plenty of people telling you how messy this can end which is somewhat true, but half of all marriages will end with messy property splits and you don't tell your friend your thinking about getting married and they reply ' Nar man this could get messy down the track'.
    Apply for a joint loan, have an end game, and create a co-ownership agreement to your situation (you will find drafts online just edit them and sign)
     
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  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    I think joint ownership with friends can certainly work and it can be a good idea in many cases. Just have to be aware of what can potentially go wrong and plan for it as much as possible.
     
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  16. wylie

    wylie Moderator Staff Member

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    For me the downside is the time I bought with three others (dad, brother, ex-boyfriend). We didn't hold long enough to make any gain (but it stopped me from spending on something stupid like a new car).

    We didn't have enough to buy my brother out and he needed his share to marry and build a house. So we sold, make enough profit to not "lose" money but really just broke even.

    The other downside (discussed already) is that buying with a mate means you are tied together financially and banks (I believe) assume you get half the rent but treat it as if you owe the full debt. So I reckon it could cripple your chance of another loan, as far as servicing goes anyway.
     
  17. dabbler

    dabbler Well-Known Member

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    There is big differences.

    First splits ups are covered by established and well used methods.

    Second, most couples will be ok with supporting the other if they cannot pay, or may already do this, but are you ok paying for your mate if they stop paying ? And is your other half ok with that ? And are you ok with who will look after all the admin etc ?

    I could go on and on.....do not encourage:)
     
  18. Boston george

    Boston george Active Member

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    I see your point.
    Although if all the questions you ask are answered in a co-ownership agreement signed by both parties then there is no grey area, you have a legal document to follow.
    If while creating the document you find that not everyone is on the same page then it’s not meant to be.
     
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    Co-ownership agreements are needed but what happens if one doesn't follow the agreement?
     
  20. Boston george

    Boston george Active Member

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    An action would be triggered outlined in the agreement.
    Don’t get me wrong I’m not saying things can’t get messy but if you prepare properly risk is mitigated.