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  • Profile photo of basherbasher
    Participant
    @basher
    Join Date: 2005
    Post Count: 13

    I’m new to this forum and was hoping I might be able to pick your brains on my situation. I have a -ve IP in Qld as a few years ago we bought my husbands parents house and we let them live in it for the first couple of years rent free but now for $100 a week. They, like most of our ageing population don’t have enough super to retire on and by buying their house it gave them some extra cash. The only +ve is the house increased in value and enabled us to use some of the equity to buy our own house. They pay all the rates and insurance etc. I’m now wondering if we are better to sell the house and just pay for them to rent somewhere. The house was recently bank valued for $340k and we owe $262k which costs $1324 in interest each month. Any ideas?

    Sarah Melbourne

    Profile photo of marliwmarliw
    Member
    @marliw
    Join Date: 2004
    Post Count: 4

    From a novice’s point of view, there seems to be 2 ways of approaching this – from the unemotional, investor ie sell; or 2nd from the angle of giving something to your in-laws. Have you asked what they want to do? Maybe they want to downsize? Maybe if you discuss your dilemma with them they can help you come up with a solution?
    Marli

    Profile photo of TorachanTorachan
    Member
    @torachan
    Join Date: 2004
    Post Count: 68
    Originally posted by basher:

    I’m new to this forum and was hoping I might be able to pick your brains on my situation. I have a -ve IP in Qld as a few years ago we bought my husbands parents house and we let them live in it for the first couple of years rent free but now for $100 a week. They, like most of our ageing population don’t have enough super to retire on and by buying their house it gave them some extra cash. The only +ve is the house increased in value and enabled us to use some of the equity to buy our own house. They pay all the rates and insurance etc. I’m now wondering if we are better to sell the house and just pay for them to rent somewhere. The house was recently bank valued for $340k and we owe $262k which costs $1324 in interest each month. Any ideas?

    Sarah Melbourne

    [biggrin]

    That’s funny. Subsidising your in-laws. Hope you relise that the taxman would be very interested why the rent is not at the market rate. If they catch up with you there will be fines, extra tax to pay. Don’t think it wont happen either.

    Profile photo of basherbasher
    Participant
    @basher
    Join Date: 2005
    Post Count: 13

    Thanks for your concern but in our tax returns we offset our expenses with rent at the current market rate, not what they pay us. We are not trying to do anything dodgy, just help them enjoy their retirement. My husband and I are lucky that we both have well paid jobs. My query is more to do with whether we can still help them but at a lower cost to ourselves.

    Sarah Melbourne

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Torachan

    You are assuming they are negatively gearing the property and that $100 is under makert value. Sarah, are you and is it? If so, …..becareful

    I wouldn’t sell if it was me. Selling an asset that is performing well is only going to cost you money and you will miss out on all the future capital growth.

    Terryw
    Discover Home Loans
    Mortgage Broker
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Sarah, sorry – I was typing while you were.

    Terryw
    Discover Home Loans
    Mortgage Broker
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of basherbasher
    Participant
    @basher
    Join Date: 2005
    Post Count: 13

    Yes the property is negatively geared and yes $100 is under the current market value. Why do I need to be careful, sorry if this sounds naive but we have discussed all this with our accountant who advised that as long as our tax returns reflect the current market rental value then what we are doing is ok? Surely there are others out there who help out family in similar ways?

    Sarah Melbourne

    Profile photo of TorachanTorachan
    Member
    @torachan
    Join Date: 2004
    Post Count: 68
    Originally posted by basher:

    Yes the property is negatively geared and yes $100 is under the current market value. Why do I need to be careful, sorry if this sounds naive but we have discussed all this with our accountant who advised that as long as our tax returns reflect the current market rental value then what we are doing is ok? Surely there are others out there who help out family in similar ways?

    Sarah Melbourne

    That’s cool then. If the accountant assures you it is above board and it turns out not to be he/she wears it. Make sure you have it in writing somewhere.

    I am very wary of dealing with family. It has a nasty nasty habit of turning very bad. Won’t go into horror stories but i’d be careful.

    Torachan
    (mate is in prosecutions in the tax office which makes him not very popular at parties but very interesting to listen to)

    Profile photo of bj in brisbanebj in brisbane
    Participant
    @bj-in-brisbane
    Join Date: 2005
    Post Count: 19
    Originally posted by marliw:

    From a novice’s point of view, there seems to be 2 ways of approaching this – from the unemotional, investor ie sell; or 2nd from the angle of giving something to your in-laws. Have you asked what they want to do? Maybe they want to downsize? Maybe if you discuss your dilemma with them they can help you come up with a solution?
    Marli

    I think that is a great idea, maybe they are looking to downsize, and that would help you come up with a solution.

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