Win-win for a Family member

Hi there,

I have a sister who has a home with only $80K to pay off on it. I would estimate the home to be worth around $275K.

However, she is single, in her early fifties and earns around $55K per annum. Essentially, money is somewhat tight for her.

She has a plan to undertake educational training which is expected to boost her income but she is hampered by the fact that this will impact her income whilst undertaking the training - for around 12 months. To assist with this, I was considering purchasing her home and renting it back to her - perhaps under a mortgage "Wrap" arrangement.

To be specific, I was considering the following:

1. Purchasing her home for around $130K - allowing her to have funds to undertake her course,
2. Having her rent it back from me for an amount just a bit more than the total outgoings I would incur - plus a fee to cover all the legals, etc,
3. Have her purchase the property back from me for an agreed amount once she is re-stablished and earning a higher income.

The key questions I have in this are:

1. How will the tax office view my "low" purchase of the property from her? Are there other tax implications (apart from CGT).
2. Is this potentially the best way to go or are there other suitable options?.
3. Could I perhaps buy a share in her home, and then she pay me rent?
4. Does anyone know of a link to a web-site that has a sample "Wrap" contract I can refer to?.

I have no illusions about working with family on such matters - consequently focussed advice or guidance would be appreciated.

Why go to all of the effort & cost of sale, leaseback & repurchase? Can you not offer your sister a loan at minimal margin over your cost of funds? Just formalise a loan agreement, determine how much she will need & when she will be able to repay you? Will she qualify for any govt allowances whilst studying? Is part-time study/part time employment an option?

You will most likely incur stamp duty at the VALUE amout, NOT the SALE amount.

Is there a reason that she is unable to draw down sufficient equity allowing a buffer for the repayments? A simlar thought to above except she is borrowing the money from herself so to speak.

Cheers

Tammy

To Scott No mates,
Providing a loan is an option.
To tammy,
Thanks for the guidance here.

To both,
Overall, I was considering endeavouring to keep her costs low as her income is not great.

I'll take your advice on board and discuss further.

Thanks for the feedback.