Hello from Brisbane

Hi there, thanks to Gockie for the introduction to this forum. Looking forward to drawing on your collective wisdom as my son and I are about to enter into purchasing a property together where his share will be his first investment property.

 

Welcome aboard

Cheers

Jamie

 

Hi Jen

Welcome to the forums!

What's the thinking behind buying together with your son? There's a few implications here that maybe you're not aware of?

 

Hi Jen! Glad you joined!
Actually the question from Jess is a very good one. If he's going to try to build a portfolio then it will be a problem. Short term, it's ok. Long term, it's not so good for him....

 

He's offered to do this with me because I don't have enough capital to buy into something myself and he wants to help me out at the same time as getting himself into a better tax position. We've met with his financial adviser who didn't raise any concerns when questioned about long term implications for my son. So I'm a bit thrown by Jess' question but open to further info

 

I think the financial advisor is not a property investor. Problem with the joint purchase is that it hurts his serviceability for any other future property purchase, and you have to assume he may want to buy an IP or his own home for himself sometime in the not far distant future. In the eyes of a lender he'll be liable for the full debt on this purchase but he'll only be able to use half the rent that the property brings in for income purposes.

Also, it could be a problem if either one of you wants to sell out. If you can't afford it, and he can't, then the best other option is that you have to sell. Does that sound familiar?

Always better to hold a property in one entity only. You get full control, and full debt but also full value of rent. Better for serviceability if you are trying to buy multiple properties.

Ps. Not sure how much of a deposit you and he each have as individuals, but if you want to buy you should each consider using an 88% loan and pay the LMI. It's possible to do more than an 88% loan, or consider vendor financing. Or just borrow funds from him to cover any shortfall in deposit and not have his name on title (though this plan won't "help" his tax problem, for him it will be better to do this than a joint purchase with his mum in the long run. I'm still assuming he'd buy something himself). In this scenario I'm making the assumption you can afford to hold the property on your own.

If the above doesn't work, unfortunately my next suggestion is simply to buy a cheaper home (Sorry).
Check your serviceability with a great broker (@Jess Peletier really has her head screwed on).

 

Welcome aboard

 

Thanks Gockie! I'll keep all of that in mind and talk it through with my son

 

Gockie has summed up the issues here perfectly

Your financial advisor probably has little to no knowledge of lending and the implications the wrong ownership structure can have. It's not really their area (though a working knowledge of this 'should' be mandatory!)

There may be better ways to achieve a similar result so it's worth looking into the alternatives.