Question about new build - dual living situation

Hello everyone!

My first post on these forums, my apologies if I'm out of line asking this question. If I am, please point me in a direction where I can seek legal advice.

Basically, I've been given inheritance from my grandfather early. My brother and I are receiving a pretty large sum of money (~250k each) and looking to buy a house together. I'm extremely new to the market and work full-time so it's been difficult trying to research on my own so I've just been talking to anyone I can and just found out about this forum.

Anyway, I'll cut to the chase and spare you my life story.

I've been speaking to a builder and he has recommended building a dual-living house. A house with two separate entries with self contained sections on each side of the house. The house is joined and each section would be completely self sufficient. The property is not approved to have a duplex on it (ie, no separate titles). I've spoken to a lot of people and have got varying opinions.

So here are my questions:

• Is it legal to build this type of house for me and my brother to live in? It would be me living on one side, him living on the other.
• If at some stage in a couple of years, one of us moves out (for instance, I move out), would I be able to rent out my half to someone?
• Now the final question is to do with tax, not specifically involving a dual-living built house. If my brother and I buy a house using cash (no debt). Then later on, one of us decides to move out. Is it possible to buy another house using our share of equity from the house we own together? And if so, can we shift the debt back onto the house we bought with cash, in order to offset the rental income with the mortgage repayments. I hope I made that last point clear...

For the last point, essentially what I'm saying is if one buys a rental property and their repayments are $400/week. However, this person receives $450/week in rent. Then the person will only have to pay tax on $50 per week.

So is it possible to convert a house you bought with cash into an investment property, by taking a loan on another house (which will become my place of residence), and convert the old house into an investment property?

Sorry if I'm sounding like a noob. I completely am and I'm just trying to learn. If anyone can point me in the right direction that would just be amazing. Thanks so much for anyone who takes the time to read this essay.

 

Probably. But you have not mentioned whereabouts you are planning to build and the regulations vary from state to state and council to council.

• Probably. But you have not mentioned whereabouts you are planning to build and the regulations vary from state to state and council to council. NSW for example would be fine, Qld not so much.
  
• Yes as long as you qualify for a loan and the other owner (your brother) agrees.
  
• No, you cannot move debt from property to property to suit your tax deductions.

It is only the interest component of a repayment that is tax deductible - not the total repayment of $400pw in your example (unless you are paying interest only). Also you have neglected other costs in your example like rates, insurances, maintenance & repairs, depreciation etc.

Yes, but the investment property will not have the loan expenses, your PPOR would as explained above. Not the best tax-advantaged way to do things.

Welcome to the forum BTW.

 

Hey! Thank you so much for taking the time to respond to my huge post, really kind of you... So regarding the location....

I guess the main thing I'm wondering about is if it's just legal to build this dual-living style home for me and my brother. Not two separate titles, just a property that allows us our separate space.

To give you a bit of background, my brother has bipolar schizophrenia. For the most part I have been covering his bills for the past few years since we moved out of home. I want to keep living with him but I also want to start a family at some stage and get him self sufficient. So this would be perfect for us with him living in a house that we still had some separation where I could look after him when he goes through a bad phase.

Anyway, just wondering how I can go about finding out the rules/laws in my area about building a duplex-style home without two titles. Literally just a house with a wall down the middle (we could even have a connecting door that keeps us separated or something. How can I find out these laws, as I obviously don't want to end up getting into trouble.

I spoke to my father and he said he thinks council would not let us do this because it is two separate dwellings on one property. But it makes me curious, where do they draw the line? If we have connecting doors? If we share a deck? If we share a laundry? Where is the line drawn between a house being not allowed because of separation?

I always thought the big deal was you can't just build a duplex and sell the other half. Again, as you can tell I'm fairly new and inexperienced to the property market. Hoping some people on this forum can lend a helping hand or point me in the right direction.

 

No this is not possible.

 

You and your grandfather should seek legal advice. it may be better if he did not give you the money but lent it to you.

it is probably not a good idea to jointly own a property with your brother either as you will be restricted from accessing equity in the future. You both must be on all loans secured by the property for example.

If you do decide to receive the gift then it would be better not to pay cash for a property but to borrow 80% and keep the cash in the offset so no interest is payable - initially better anyway because it gives you more flexibility.

 

Honestly the legality of the development is based on the individual council controls, and the zoning of the land. In NSW for instance some local government areas allow you to do a dual occupancy in a low density residential zone but not subdivide. Some don't allow you at all. Others allow you to do them and subdivide. I can tell you if it is legal in principle or not (if it is in NSW) but not without knowing the zoning or the local government area.