I have seen a few of these groups form over the years, and can’t remember one that has actually done anything. Doesn’t mean your’s won’t, but just be aware the more people you have the harder it is to agree. Then there is the fact that some will work harder than others, some will contribute more than others and some will resent this (and other things!).

You should probably use some sort of trust, but be wary of using all names in one hit. These may eat up serviceability quickly. It may be better to set up one trust per person and have it so that each person can be a beneficiary. Start with one at a time, maybe the person with the highest income for servicing.

go to http://www.lawcentral.com.au and have a look at their JV agreement for the joint purchase of property. You will need something like this drawn up from the beginning.

Hope this helps.

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Hi Trajik

I don’t have any experience with lending for these, but heard of LVRs around 60% and commercial rates.

I am not very impressed with these sorts of investments because of the lower LVRs, higher rates, difficulty in selling and possibly high management fees.

If you borrowed to invest in one, you would probably only break even and be hoping for capital growth. So you have to factor in the opportunity cost – you could be investing elsewhere and your borrowing capacity would also be adversely affect too.

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The good old salesperson is not known to exaggerate!

I think they must have been talking about capitalising payments during construction. Which is possible, but you have to have the equity to do it. Sometimes it is possible, it just depends on the LVRs and your serviceability.

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I think the only extra tax you may have to pay is Land Tax – and this would depend on the value of the land component of your property.

If your rent is less than your costs, then you could negatively gear the property – ie claim the loss against other income. And you should also be able to claim depreciation.

It would be a good idea to get a depreciation schedule done and a valuation done as well, for CGT reasons. Maybe also run the scenario by your acountant for some other tips.

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Well, you will agree on a price now. So they may end up paying you a bit more rent per week now, but if they purchase the property down the track, prices will have risen, but their purchase price will have dropped (probably, depends on how it is structured). So they will be buying at a discount.

You are basically giving up future potential capital gains for more rent now.

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Since the repayments are less, if you could invest elsewhere with a higher return on the money you save, IO may be beneficial.

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Why buy in the country? Population growth is lower, and this would potentially limit capital growth

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Because:

When you pay PI you are paying down the loan. This involves extra repayments. This will reduce the amount of interest you can claim on your tax for an investment.

Instead, if you use a IO, the repayments will be lower. The extra money can then be diverted to reducing your home loan faster. This is beneficial as it is non deductible debt.

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I would just refuse to pay it. If you give in this time, what will he do next? Demand pay TV maybe????

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