What would you do if you had.....

I read it like that as well, have to buy their house of them.

 

Sorry you both are right, poorly worded in my case.

We want to buy them a house as a gift for their help with the deposit of the development. And not charge them rent.

I'll see if I can edit the op.

 

if you have $160k cash but they need a $400k loan you could do a few things
1. Borrow another $240k secured against another property and lend this to them with the $160k loaned as well.
2. Their property would be unencumbered, or mortgaged to you. They could then let you use this property as security for your development (may not be so easy if lenders will think you may lose the parents main residence). Parental Guarantee type loan.

OR
1. You go on title to their main residence purchase -10% for you and 45/45 for them.
2. You all jointly get a loan.

 

ideally they should have lent you the deposit for the other property. You could have refinanced their loan with a bank and repaid them.

Remember if you have a main residence and they have a main residence that is 2 properties that are now CGT exempt.

 

No worries, I think you clarified well enough above already.
I was a bit slow after reading your original post.

 

I was already too close for loan serviceability at the time without a loan to my parents thrown into the mix, anyway that's under the bridge now.

 

It could have been structured around that.

 

Buy parents a place and wait. Their end of the deal has been fulfilled. Triplex development is completed with their lent money. Their turn to benefit.

 

I like my idea of buying the parents place and then using it as security - you can have your cake and eat it too. Just don't drop it on the floor.

 

But we can't afford to pay their loan due to the decrease of rental income on our triplex. We have to do something to help them and us, it's too risky to just buy a place for them.

 

Why do you only have $200k in equity if you developed and had money from your parents to start with? Did the development go wrong?

 

We had $150 from my parents, we used that to fund the construction and make interest payments during construction.

The triplex finished with a loan of $1.05m, we just refinanced to go from construction loan to 3 residential loans at 90% LVR. Hence why we have cash now of $160 and loan of $1.2m.

 

So we can currently borrow $800, We'd need to borrow $400 for my parents place, and at least $650 for the development in that order, are you saying this is possible with what you are suggesting?

 

I don't know if it is possible but it could be.

 

Thanks Terry.

That's great if I could buy both places, however I'm concerned about servicing the loan for my parents.

If we could get the funds how would you all spend it? Bearing in mind the outcome would have to help funding of my parents loan on an ongoing basis.

 

You do seem to be highly geared - very highly. So it may be best to slow down a bit and not put your parents home at risk.

 

I see. It reads like it's either or. Either buy your parents a place, or keep on developing. Sometimes you just have to sit and wait. Frustrating, but part of the game.

 

Why not just pay them their cash back and start from square one? No 'having' to buy them a house then.

 

$150 seems pretty manageable.

 

Simply giving them their cash back would not help them get a house as they can't buy anything, no income. And it would leave us with no cash to move forward.