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Joint investment/Investing with family member

Discussion in 'General Property Chat' started by morrisbrown, 7th Aug, 2016.

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  1. morrisbrown

    morrisbrown Member

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    Hi all,

    First of all I would like to say Hi, my name is Mo and I've been a member for a few months now. Just wanna say that each post in this forum has been really informative and valuable as I partake the path of property investing.

    So back to the topic at hand, my parents have an investment property together. A few months back, my mother lost her job, with my father trying to hold on to their principal and investment property. They have both agreed to take my mother out of the mortgage and have myself to join my father as a joint investor.

    My question is to you guys is:

    1. What needs to be done to initiate the joint process? e.g banks, solicitors, etc
    2. I already have an investment property, how does this affect me besides increased mortgage repayments?
    3. Will this joint venture with my father help me with purchasing more investment properties in the future.

    Thanks guys, any suggestions will be greatly appreciated

    Mo
     
  2. MsAli

    MsAli Well-Known Member Premium Member

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    Hi Mo

    What's the difference with you being on it? Is that because you'd be contributing to the mortgage?

    I don't see how this will help you get more properties other than increasing your liabilities before you've even started.

    I'd be seeking legal advice before you go down this route.

    All the best.
     
  3. hammer

    hammer Well-Known Member

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    Investing with family is normally a no go.

    It's just not worth the pain if it goes wrong. There really are some things that money can't buy.

    You need to get legal advice.

    However my gut feeling is that if your Olds can't afford the IP then something is wrong with the IP as an investment. In theory it shouldn't cost that much to hold - which means your folks either have a problem investment or there is something else at Play (other debts?)...

    Be very, very careful.
     
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  4. morrisbrown

    morrisbrown Member

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    Thanks MsAli, i knew there was another perspective outthere lol. But in all seriousness, I thought that having another property in my portfolio would make me grow my borrowing capacity for the next investment property and so forth. The property has shown growth in the last 8 years, so if I purchased another property let's say next year, could I take the equity out? Obviously with my fathers consent? Cheers
     
  5. morrisbrown

    morrisbrown Member

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    Thanks hammer, I still need to sit down more with my parents and get as much info as I can, we are very open to one another and have a trusting relationship. So I guess I will need to get every information there is before I commiting to it.
     
  6. MsAli

    MsAli Well-Known Member Premium Member

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    It will reduce your borrowing. Sounds like a liability. If you are on the title, you will be on the loan. What about the rental income? How will that be accounted for? Not to forget the joint and several liability where only a portion of rent will be attributed to you and you'd be liable for the entire lending - of course it depends on the lender. However most would see it this way.

    You could have your parents go guarantor for you to use the equity to purchase more property. Will come down to how your relationship is with them and what are you trying to achieve for THEM and for yourself. I'm of the approach, never say never, if you can work these outcomes out for yourself and your parents then it's great if you can help them and have a win win outcome.
     
    Last edited: 7th Aug, 2016
  7. Joynz

    Joynz Well-Known Member

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    If you do this, do it to help your parents, not as a way to make money for yourself.

    Why not just help them pay the loan temporarily by lending them some money or paying half the payments until they are on their feet again?

    After all, they are your parents and did everything for you as a baby...

    Otherwise, if the property is in Melbourne, they could sell in the rising market.
     
  8. sanj

    sanj Well-Known Member

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    Agreed. No need to make a complex issue out of a simple situation, plus youre going to haveto pay stamp duty and they pay cgt and then youre going to probably have a hit to your servicability as well

    Sounds like you can afford to so gift or lend them enough to tide them over instead imo.

    Btw unlike general consensus here i actually do invest and go into business with family members and friends and so im not against the idea at all, just dont think this proposed scenario makes sense. Just my opinion though
     
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  9. morrisbrown

    morrisbrown Member

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    Thanks for all the replies guys, really made me think inside and more importantly, outside the box. I can always help out in different ways as you guys have said. Well my father and I are going to take legal advice and see where that will take us moving forward. I'll update you guys my decision soon. Cheers
     
  10. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    1. See a property lawyer who will likely be a conveyancer as well. If you want to proceed then see mortgage broker who specialises in investment portfolio lending.

    2. It will effect future servicing considerably as you will be considered "joint and several" by the majority of banks. This means they will assume you are responsible for ALL of the new mortgage payment even though your Dad is a 50% owner and meeting his obligations. You will only get 50% of the rent though.

    As stated above, why you need to see a strategicically minded mortgage broker who will consider all varaibles both present and future.

    3. No, it can slow you down or maybe even stop you in your tracks depending your situation, so perhaps see an MB before seeking legal advice to save some coin and to see whats possible.

    Im with Sanj and believe its more about the persons integrity and track record that would determine a business partnership as opposed to wether they share the same DNA or not!
     
  11. datto

    datto Well-Known Member

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    Mo, wait until your oldies are on the brink and then buy them out on the cheap.

    You can then rent the PPOR back to them.

    To ease your conscience and any family tension, promise them a world cruise upon their retirement.
     
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  12. morrisbrown

    morrisbrown Member

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    LOL! I like the thought of this, don't know whether I could convince them though!
     
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  13. datto

    datto Well-Known Member

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    Yeah not a bad idea. Sort of thing that happens in the Druitt. Does create family tension so don't entertain the thought too long :). @morrisbrown
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    1. Get legal advice, including tax
    decide how to own
    Get pre-approval
    Prepare a contract of sale at full consideration
    prepare transfer with full consideration listed
    pay stamp duty
    Pay mum at settlement, she pays out her share of the loan.
    Mum pays CGT (later)

    2. You now have another one.
    far reaching consequences
    too many to list

    3. NO
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If your parents have a cashflow issue perhaps they could borrow to pay the interest and use the opportunity to keep the property and increase deductions at the same time.
     
  16. sanj

    sanj Well-Known Member

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    Legal considerations are of course very important but first thing is to work out commercial viability.

    Imo one of the major shortcomings of many in the legal profession (not in any way referring to you btw) is being solely focused in legalities and not considering commercial realities. In my experience the best lawyers are able to do this. Granted that jn some areas this skill is more important than in others
     
  17. albanga

    albanga Well-Known Member

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    I would be questioning how an IP bought at a minimum 8 years ago as you have eluded to is not holding its own? It should almost certainly be CF+?

    Was it a bad purchase? Perhaps a deserted mining town? Paid 30k LMI?

    Just not really adding up to me? Perhaps shed some more light of possible. Based upon that then all troubles could be solved by selling this lemon investment.

    Or and I don't mean this at all in a negative way, your looking to try and leverage with your parents is more the case here? If so I would suggest there are far easier ways than muddying the waters.
     
  18. Joynz

    Joynz Well-Known Member

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    Where is your parents investment property?
     
  19. morrisbrown

    morrisbrown Member

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    It's in Pakenham, Victoria, they purchased it for 340k and renting it out for $320 atm, rent can easily go up and average rental there are around $360-370 with 4 bedrooms 2 bathrooms
     
  20. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes that is true Sanj - no point in seeking legal advice if it is a no goer.


    c