Selling half of my property - thoughts

Hi all - one of the investment properties I own is a joint investment 50/50 with a close person in the family.

I have agreed with them that I will sell half of my investment property to him.

Our loans are both $240,000 meaning total loans across both of us is $480,000.

Property value now is around $1.2 million.

I am trying to find out the best way I can release ownership of the property in the fastest/easiest way possible. Basically I will be paid around $360,000 in cash (my portion of the equity), and my investment partner will take over the additional $240,000 loan.

What would you suggest (for anyone who knows or is familiar with my scenario) is the quickest way to move ownership to my investment partner and to to take on the loan?

Thanks in advance for your help.

 

Assuming it's in personal name entities, would it not just be the case the other party pays you $600,000 you clear your loan. May involve them increasing their mortgage on the property to cover any shortfall they don't have in cash e.g. bring their loan up to $480,000. You transfer your half of the ownership into their name.

 

‘Taking over’ the loan is probably the wrong term to use.

 

Makes sense to me. Thanks Ryan. Will look into it.

 

But you see what I mean.

 

You would still need a contract. Is the loan joint? Who pays for costs to discharge the mortgage? Adjustments for rates etc?

probably most importantly, is the other party able to borrow enough to pay you out and refinance their loan?

 

@PropDir , you might like to check if there is stamp duty involved ?

 

Stamp duty paid by the buyer, and capital gains paid by the seller.

 

I will take care of the discharge costs for existing loan (since it's my loan) - it is currently a fixed loan for next 2-3 years - how much roughly do you think most lenders will charge for the break costs? I will happy adjustment costs etc too that's fine.

No, they are 2 separate loans however the ownership is joint.

Would I still need a contract if I simply transfer ownership (i.e. not 'selling' it, just reconfiguring ownership).

 

Hi AxeLy - that's what I was thinking - is there a way to get around it given this is just a change in ownership not anything being bought/sold here?

 

Guess we can't escape the ATO on this. I had transferred the title of one of my properties to my parents [as Gift]. All happy... till the conveyancer advised that my parents had to pay the stamp duty based on market value of the property.

 

Thing is, what you think it is, or what you call it, doesnt matter. Besides the fact that your opinion is probably wrong legally (change of ownership is a transfer).

only the ato, osr and lender’s opinion matters here.

if you are willing to pay break costs, splurge another thousand for a lawyer.

 

Get some legal advice.

Quickest way would be for a declaration of trust to be done - 5min and you are now trustee for the other party.

But more practically they should seek a preapproval to make sure they can borrow and then purchase you share under contract for full market value with payment at settlement.
This could be done quickly - as soon as 2 weeks if there is a speedy lender.

 

Will definitely be stamp duty involved, unless you were acting as trustee for the other person since purchase, or unless passing under a will - or a family law settlement.

Dont forget the CGT

 

You should probably break the loan before settlement so you can claim it as a deduction, rather than as a capital cost.

 

Thanks Terry, would you suggest any suitable lawyers I could consult about this? Should only be a very quick engagement. I am located in Sydney in Hills district.

 

Try Glen at Home - Macfarlane Lawyers, Sydney

 

Thanks Terry - will do.

 

Consider breaking the loan now to go variable. Not at settlement. The break fee may be tax deductible against your share of rental income that way. When a break fee is incurred at settlement it is a CGT cost and only counts to 50%. of its value