All Topics / Help Needed! / Selling portion of your property

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  • Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    Does anyone know about selling a percentage of ownership of your property?

    Profile photo of Blue Ridge HomesBlue Ridge Homes
    Participant
    @blue-ridge-homes
    Join Date: 2010
    Post Count: 32

    Know what about selling it?  How the bank treats it (partial release of security), how to subdivide (generally see a town planner and surveyor) …..

    Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    Here's what I was thinking.  Say you buy a unit for $600,000 then you renovate it to up its value to $700,000.  After this lets you decide to sell a percentage of the property to an investor say $200,000.
    I was primarily concerned about how does the bank treat this in terms of providing a loan to an investor for partial ownership and does this incur stamp duty?

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    OK, firstly I've gotta ask why would you do this rather than taking on a partner earlier?

    Selling a portion is always looked at as a distressed sale, your selling price will be reduced and it will be more difficult to sell the remainder. How do you intend to structure it – tenant in common or joint tenants? Which bit are you selling? Who to?

    If you are selling, then the purchaser will pay stamp duty.

    Profile photo of Blue Ridge HomesBlue Ridge Homes
    Participant
    @blue-ridge-homes
    Join Date: 2010
    Post Count: 32

    You need to speak with a lawyer, accountant and banker.  The bank can't half sell a property so they would take security over the whole of it.  Any changes to title aside from spousal to my knowledge incur stamp duty.
    Sounds a strange set up, your accountant may suggest setting up some sort of company structure before you even start to sell shares in the company to the investor rather than the property being in your personal names.  The company would then own the property.
    Overall not my cup of tea….

    Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    Thank you for the feedback.  The way this is meant to work is as follows:

    You buy an apartment worth $600k in a company name.
    Renovate it to make it worth $700k then once it's leased for a higher rent sell a share of the property value, we'll say $200k/21% to a low end investor.
    This way they take out a loan seperately for themselves and you end up with $200k cash from the bank (minus tax ofcourse) and you're only earning 79% of the rent.
    Then you have the extra $200k that you can either put against your mortgage or into your next investment. 
    If you put it into another investment, even though you'll be paying the same mortgage as before you can claim a higher tax deduction and a lower taxable income.

    Anyway that's my idea and method of thinking.  Keen to hear your thoughts.

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Dr doom

    Great in theory but i hate to say couple of points worth noting:

    1) You will pay CGT on the partial sale but i guess that can factored in.
    2) The investor will also need to be on the loan so will need to be happy to be Jointly & Severably liable for the entire debt.

    Good luck in finding someone who wants to take over your debt.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Die HardDie Hard
    Member
    @die-hard
    Join Date: 2011
    Post Count: 23

    Ok I see.  Well thank you for clearing up that second point about the loan Richard.  It's not as simple as one party having one mortgage while the other party has a loan from a different provider.

    Much appreciated.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Eh nope …. hate to say.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

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