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JVing with a family member

Discussion in 'General Property Chat' started by Melbpositivegeared, 27th Apr, 2016.

  1. Melbpositivegeared

    Melbpositivegeared Well-Known Member

    Joined:
    23rd Jan, 2016
    Posts:
    72
    Location:
    Melbourne
    My sister has turned 18 and got her first full time job. She's eager to get into the property market and has a small deposit - but not enough to move forward on her own.

    I've been exploring ways that we could purchase something together. My thoughts are to get something under the $250k mark in need of a good renovation. (My dad helped me renovate my first- and he's promised to do the same for her).

    If we do invest together I want something that will end up positive geared - I don't want to put an 18yo in a position where they can't travel and live a life because they're bleeding cashflow.

    I also need it to actually make sense for me and my own portfolio. I was thinking maybe we find something subdividable and sell the back off to put our deposits back into our pockets.

    It would be treated like a proper business relationship with a JV document in place.

    Has anyone got any experience/ advice when investing with a young person?
     
  2. Plutus

    Plutus Well-Known Member

    Joined:
    30th Jul, 2015
    Posts:
    267
    Location:
    The North
    Personally I think you need to add another 0 onto the end of that price tag to make a full on contractual JV worth the cost & effort. at a $250k purchase, we're not talking about a huge capital contribution from you from the sounds of it. I imagine your contribution will mostly be skills, labour & materials?

    Also this is going to be another hit to your serviceability.. Why bother? Buy it in her name, do a handshake deal (she's your younger sister...) over your contribution to be paid off on terms you're both happy with & go buy it.

    If that's not doable, is it going to kill her to wait another year or 2? I bought my first place without any assistance at 21 (which wasn't that long ago...) & I don't think I would've had the maturity or knowledge to it wise to enter the market at 18. From the sounds of it she doesn't either & you're going to be doing most of the leg work.
     
  3. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,225
    Location:
    NSW
    Investing with another person (older or younger) kills your serviceability on future loans you may want to take out. You and your sister will be assessed as though each one of you alone are responsible for the full mortgage repayments but only entitled to half the rental income.

    Also your budget of $250K for something sub-divideable in a decent area is unrealistic IMO.
     
    Gingin likes this.
  4. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,105
    Location:
    Melbourne
    I am fairly new to property and entered it 4 years ago on a JV with my brother. My contribution was 17k.

    We did a subdivision/renovation and the end result was over 100k net profit each.

    I think JV's are great so long as you have an exit strategy and you both understand how you will be affected in that time. I actually mentioned this in another post today, I would personally not reccommend a JV that includes a long term hold. Life changes!
     
    York and Leo2413 like this.
  5. Gingin

    Gingin Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    90
    Location:
    Sydney
    Don't do it together in name. Buy in her name only. By all means help with a deposit by loaning her 25 k from a redraw of yours that she services. For sure be a good bro and help her renovate. When possible she will refinance and pay you out.

    Don't tie each other up, it will hurt you both in the long run and will complicate things.
     
    wylie likes this.