2019 Money Magnet Symposium - Discover how to make, and keep, more money and achieve a financially empowered future
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  • Profile photo of Min1966Min1966
    Member
    @min1966
    Join Date: 2003
    Post Count: 0

    [8)]Hi! My father and I are about to buy a house together. I have $250,000 and he’s got $80,000 as a deposit. We are going to take out an interst only loan of $190,000 and pay back the mortgage 50/50. That will mean that I have a 66% share in the house and he will have a 34% share in the house. This will make paying rates and shared bills easier to divide up. The only thing is, my father earns a lot more than I do and he would be in a greater position to say do up the kitchen, bathroom etc on a place we buy. I would not have the financial freedom to do that. If he goes ahead and does renovations on the house, how does that affect his equity in the house? Is there and easy answer to this question?

    Profile photo of DramDram
    Member
    @dram
    Join Date: 2003
    Post Count: 82

    Hi,

    If you purchase the property together as co-owners then there are two ways you can legally arrange the purchase.

    Joint Tennants – legally you will both own 50% of the property regardless of who pays for what. In this case you both are able to claim for 50% of costs, even if your father pays for the reno.

    Tennants-in-common – legally you can specify who owns what. eg you own 66% and your father 34%.

    So, if you are going to put more money into the property (in the form of deposit and repayments), tennants-in-common may be the way to go. For the reno, you could estimate the cost and add it to the purchase price[?] then calculate who pays for what percentage of the total cost.

    There are also some legal advantages to Tennants-in-common….

    * Your share is your legal entitlement. So if for example you and your father had a falling out (or heaven forbid die [:(]) your share is protected and remains with you or your estate. With joint tennants the share goes to the other person.

    * Lets you divide rental income (as well as expenses) according to the share holding.

    Hope this helps.

    Cheers

    Profile photo of kooringalkooringal
    Member
    @kooringal
    Join Date: 2003
    Post Count: 31

    HATE to be negative, mate, but DON’T DO IT!

    Find a house you can buy YOURSELF! I KNOW it is really really scary, and what if you lost your job and what if…etc etc…BUT, there is NO way not to end up in arguments, him with ‘control’ over you, and unless you are a super docile daughter, DON’T DO It!

    Take it from one who was BURNT!

    Go out on a limb a bit, buy something good, and work hard to pay it off , do it for YOU.

    Your dad will still help you ‘do it up’ and you can ‘pay’ him for his time, either by swapping skills, ie washing his car, ironing, doing his garden, whatever, he will be PROUD to be helping you on your way, but DON’T ‘go in with him’ just because you doubt yourself, or you want a bit of security in case something happens to you – NOTHING will ‘happen’ and if it does, you can always sell…

    IF you DO decide to buy with dad afterall, WRITE down all your plans…ie

    You choose the property. Write down for your dad what you would like to DO to the property (ie my dad was HORRIFIED to find out I wanted to paint the interior all white and rip up the smelly old brown carpet and polish the floorboards and put in security grills…it was one argument after another…dad is cheap, I like nice fittings, dad grizzled over every payment, I’m not ‘mean’ about that sort of stuff, it was horrible, an OK relationship will NEVER be the same again, thank god we’ve sold now, I couldn’t do it anymore, I was miserable, and we sold a great property below market just to get out, I had had enough, I would never wish such a situation on any dad and daughter.

    So, tell your dad how YOU see your prospective purchase, don’t hold back, if you want a picket fence, etc etc, write it down and give him a copy and ask him what HE thinks – he might see things very differently…when you say ‘he can do it up’, what HE has in mind and what YOU have in mind may be very different…

    What he considers ‘adding value’ you may not…beware!

    I think you should have an ‘investment plan’, just as if you were buying shares.

    Write down EVERYTHING. This can be revised, but don’t be conned into NOT writing everything down ‘because you are family, and you can ALWAYS work things out as you go along – WRONG!’.

    Work out a ‘sunset clause’, ie how long you would like to hold the property. Ie say 5 years, and then if either wants to sell, the other gets the option to buy them out at market value (valuation, the prospective purchaser to pay for the valuation, if the seller not happy, they should get their own valuation, at their own cost, and you split the difference and that shall be the purchase price – write it down!)

    That way if you want to get married, dad can’t hold on to this property forever and tie up your finances so you can’t buy elsewhere with hubby, or go overseas or whatever. If he doesn’t want to do what YOU want to do, you will always know that at least after 5 years, if YOU want out, he is obliged to buy from you, or you put it on to the market and both take your profits.

    Write down the cost of everything you do to the place and who pays for it.

    It doesn’t matter much about reimbursing your dad for repairs. he will claim his costs off his tax. see ‘repairs’ or ‘capital improvements’ specifications at tax office website or other literature.

    If it’s repairs, you pay him 50-50, or whatever you two decide, and you claim your share off your tax, he claims his off his tax.

    If your dad does/pays for capital improvements, he keeps track of them and you do a settlement when you sell or whenever you decide.

    Ie you buy the place, 75-25, you and your dad.

    He pays for a new kitchen. ie new fittings $5000, workmanship at $20/hr $1000.

    WHEN YOU SELL, instead of getting 75-25 at settlement, your dad will get his 25 per cent of the selling price, plus you will give him $3000 from your share, as half the cost of the capital repairs he made a few years earlier.

    Or you can work out your own system – but WRITE IT DOWN, and hopefully you will avoid many tears.

    I wanted to put in a sunset clause as above, my dad and our solicitor said nah, not necessary.

    Well, dad was a PAIN to deal with. Really ‘cheap’. I hated it. He was cheap with the tenants, cheap with me, I just wanted to get out. He said I could buy him out, but he wanted a fair bit more than ‘market’, so in the end, I decided to sell out of the house I loved rather than have him hold it over him for the rest of our lives that I ‘ripped him off’, too long and sad a story, but please, think twice before ‘going in with dad’, especially if you love him.

    My step dad helped me paint the house, do the plumbing etc, I paid him, less than market, but I really appreciate his work.

    Your dad will help you without you having to let him ‘come in’ on your house, and DON’T feel guilty to give it a go on your own.

    Have confidence! I wish I had believed in myself a few years ago as much as I do now.

    Good luck,

    Kooringal.

    quote:


    [8)]Hi! My father and I are about to buy a house together. I have $250,000 and he’s got $80,000 as a deposit. We are going to take out an interst only loan of $190,000 and pay back the mortgage 50/50. That will mean that I have a 66% share in the house and he will have a 34% share in the house. This will make paying rates and shared bills easier to divide up. The only thing is, my father earns a lot more than I do and he would be in a greater position to say do up the kitchen, bathroom etc on a place we buy. I would not have the financial freedom to do that. If he goes ahead and does renovations on the house, how does that affect his equity in the house? Is there and easy answer to this question?


    Profile photo of hwd007hwd007
    Member
    @hwd007
    Join Date: 2002
    Post Count: 247

    Hmm, you say you have $250,000 Am I mistaken ? Well lucky you either way !, go buy yourself a brand new investment property. Go passed GO and collect positive or neutral cashflow.

    Forget about buying some old dump and doing it up. Also again if you must buy with your father, buy brand new and forget all about rennos. It’s much simpler, nothing to do no rennos. If you have $250K you can structure it cash positive or cash neutral at your choice. Plus you get good capital growth.

    Or did you mean you can borrow up to $250,000 ? in which case buying the older property makes more sense, but still I prefer new for less hassle. I’m not sure what you meant.

    just one thing, when ever you find your dream IP, get it independantly valued by a professional.

    Go to it now kid ! [8D]

    Profile photo of scottscott
    Member
    @scott
    Join Date: 2003
    Post Count: 110

    G’day
    I’m buying IPs with my parents at the moment and we’re all confident that none of us will have dramas! Sure we clearly stated our aims and goals at the start, but this forced us to develope a plan early on. If the pair of you are close there should be no probs, just make sure you know where each of you stand before you start.

    Kooringal, no offence meant by this, but surely you should have known that you and your father may have issues before you entered into a joint venture, I knew exactly where dad and I would differ and we sorted it before we started. Sure we still have some quibbles but we’ve pretty well got it covered. Both of us know what goes and doesn’t go, as we established it early on, and we’re both grown up enough to sort it out quickly if we do disagree.

    What it comes down to is talking it over with your father, and clearly defining what goes and doesn’t go, eg; he wants to reno and you don’t have the funds, you have to work out between you how any CGs and extra income are divided between you. None of us can just tell you what to do, both of you have to be happy and in agreement with the way you divide any income and costs. Who knows your dad might be happy to pay for the renos and just split profits in two. I’m paying all purchase and setup costs on our IPs at the moment, and I’m more than happy with that, because I feel that it’s the least that I can do for mum and dad, and it’s going to benifit me in the end.

    Just be clear on where you stand and go for it!!![;)] I’ve got no regrets.[:D]

    Cheers
    Scott S

    “Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
    -anon

    Profile photo of kooringalkooringal
    Member
    @kooringal
    Join Date: 2003
    Post Count: 31

    [
    Hi Scott, you sound like you have it sorted and I am really happy for you. We have another friend who buys with his parents and it works for them (but they are not ‘cheap’ and he isn’t either…)

    And you’re right, I should have INSISTED in talking about things with dad FIRST – he just thought I would do what HE wanted, which is the way it had always been, but when I bucked, he went OFF…it got personal and I was miserable.

    I just had this blithe confidence that we would be able to work things out in the end – we didn’t really.

    I’m pleased it’s working for you.

    If I had $250,000 to spend, even if I had to service it myself, I would still buy BY MYSELF, not with my dad, NEVER again, unless, as you say, your goals are the same, your style is the same.

    NOW I would be able to go in with a ‘dad type’ person on something and I don’t think I would be a mess.

    THEN I was very naive, full of enthusiasm for my first purchase, and I was very sad it became a miserable experience for me, personally and financially in a way too.

    I just thought I’d tell my point of view, because it depends what sort of person you are and at what stage you are at, I think, and our mate here might be at my stage, or at your stage, she can decide that.

    Cheers, Kooringal.

    I’m buying IPs with my parents at the moment and we’re all confident that none of us will have dramas! Sure we clearly stated our aims and goals at the start, but this forced us to develope a plan early on. If the pair of you are close there should be no probs, just make sure you know where each of you stand before you start.

    Kooringal, no offence meant by this, but surely you should have known that you and your father may have issues before you entered into a joint venture, I knew exactly where dad and I would differ and we sorted it before we started. Sure we still have some quibbles but we’ve pretty well got it covered. Both of us know what goes and doesn’t go, as we established it early on, and we’re both grown up enough to sort it out quickly if we do disagree.

    What it comes down to is talking it over with your father, and clearly defining what goes and doesn’t go, eg; he wants to reno and you don’t have the funds, you have to work out between you how any CGs and extra income are divided between you. None of us can just tell you what to do, both of you have to be happy and in agreement with the way you divide any income and costs. Who knows your dad might be happy to pay for the renos and just split profits in two. I’m paying all purchase and setup costs on our IPs at the moment, and I’m more than happy with that, because I feel that it’s the least that I can do for mum and dad, and it’s going to benifit me in the end.

    Just be clear on where you stand and go for it!!![;)] I’ve got no regrets.[:D]

    Cheers
    Scott S

    “Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
    -anon
    [/quote]

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