All Topics / Help Needed! / What would YOU do…?

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  • Profile photo of salsachinitasalsachinita
    Member
    @salsachinita
    Join Date: 2005
    Post Count: 34

    …..if you were in this situation:

    We (my partner & I) are living in my former IP (bought ’99, with my father, whose name is still on the title/mortgage) , located in inner bayside Melbourne (St Kilda East). It’s a 2 BRM ’60s flat (reno of kitchen/lounge just completed, bathrm to do next), almost all paid off now.

    We are contemplating on what to do next. Of course, the equity on this property (now a PPOR) is enough to get another IP.

    The dilemma is the fact that my father’s name is still on the title, making any change complicated (he is unwilling to do anything, apart from paying the mortgage off).

    What would you do in our situation? Put all resources into paying off the remainder of the mortgage ($45K), or complete the bathrm reno ($20Ks)….? Wait for the price to drop a little more before buying, or start looking now….?

    Or simply save money to build a cash fund, for the near furture?

    Any suggestion would be really appriciated!

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544

    I would suggest you do the one step two steps forward manouvre.

    That is refinance the property and buy out your father’s share and then move forward from there. The fact that your father’s ideals are different to yours and his willingness to focus all energy and cash on paying this property out without consideration of the next step will hold you back in the long term.

    Pay these costs and then move forward.

    Derek
    [email protected]
    http://www.pis.theinvestorsclub.com.au
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    Profile photo of mbutler2575mbutler2575
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    @mbutler2575
    Join Date: 2003
    Post Count: 21

    Hi salsachinita,

    What outcome did your father want for the investment? This will help in determining the next step.

    Presumably you and your father bought this property as an investment. Given this would he be willing to take a profit if you bought him out of the deal? You could then own the property outright and do what ever is required.
    If not then it could be messy as to refinance would require his consent which he doesn’t seem to be willing.

    Another otion is to move out of the flat and allowing it to become an IP again. This would take some of the emotion out of the deal.

    I would suggest talking to you father about what your plan is about the next investment and how it will make money even with an increase in debt.

    Unfortunately you have muddied the water and not only have the IP as PPOR but also your father involved. Sometimes mixing business with personal and family can be confusing so maybe it is time to clear up the confusion.

    I hope this helps.

    Mark

    “Is this taking us CLOSER to our goal?”

    Profile photo of brahmsbrahms
    Participant
    @brahms
    Join Date: 2004
    Post Count: 485

    do you really want to spend $20k on a bathroom in a ’60’s flat?? solid gold throne?

    you could use these funds to purchase something else – i’m presuming dad isn’t footing the bill for the new shiny bathroom?

    cheers

    brahms
    Purveyor of Fine Finances
    aka Mortgage Broker Brisbane

    Profile photo of Stuart MilneStuart Milne
    Member
    @stuart-milne
    Join Date: 2006
    Post Count: 196

    Convince him to transfer the property into a Discretionary Family Trust with him as the Trustee, and not a named beneficiary. Then have the Settlor sack him as the Trustee and install a Corporate Trustee of which you and your partner are the directors, re-finance the property pay him out his share and move along purchasing the next property in your newly acquired trusts name as well.

    Of course if you don’t want to start a massive Family Rift and destroy your relationship with your father, you could always explain that you are trying to build a legacy for your children so that they don’t have to work and that he is holding you back from creating enough wealth to achieve this goal. I don’t know him, but it sounds like he doesn’t fully understand the difference between Good and Bad debt and views it all as bad?

    You also have the option of 100% finance through a few lenders even for I.P.s so that may be worth investigating too if he is still inflexible after explaining your goals to him regarding your property portfolio.

    Ps: I don’t personally recommend option 1 it was thrown in for humour although some won’t see it that way no doubt…

    Stuart Milne
    Non-Conforming Specialist
    READY Mortgages
    http://www.readymortgages.com.au
    [email protected]
    Mob: 0404 056 055

    Profile photo of salsachinitasalsachinita
    Member
    @salsachinita
    Join Date: 2005
    Post Count: 34

    First of all, let me thank everyone who took time to read & reply my first official thread [blush2]…..!!!

    Originally posted by Stuart Milne:

    Convince him to transfer the property into a Discretionary Family Trust with him as the Trustee, and not a named beneficiary. Then have the Settlor sack him as the Trustee and install a Corporate Trustee of which you and your partner are the directors, re-finance the property pay him out his share and move along purchasing the next property in your newly acquired trusts name as well.

    Ps: I don’t personally recommend option 1 it was thrown in for humour although some won’t see it that way no doubt…

    Thanks for this idea (joking or otherwise), Stuart!

    My father & I are close, so if we explain this idea properly to him, as a mere strategy, I’m sure he would go along. My partner & I are currently learning about trusts & their benefits, so we are definitely interested.

    (Is it actually a workable idea, or it is a non-workable joke? Sorry, had to be sure……..)

    Profile photo of salsachinitasalsachinita
    Member
    @salsachinita
    Join Date: 2005
    Post Count: 34

    Just thought I’d provide a little bit more information about this situation, and a brief history about this property…….

    In ’99, I got out of an abusive relationship with enough savings of my own. Not wanting to move back with my parents, I bought this property with 20k deposit (costs $190k), except I had trouble getting a loan, as I was only working on a cash-in-hand, cotract job (which I could afford the repayments on). So my father stepped in, got a joint-name loan, and insisted that the only condition to this is that he also has his name on the title (to protect me from possible disasterous relationships in the future).

    Soon after settlement we figured it’d make better financial sense to turn this flat into an IP & for me to move back to the family home.

    It was CF- but it was quite affordable, with both my father & I contributing. Until I got ill (diagonosed with MS in ’01) & could not work any more…..

    My family had been taken care of me, as well as all financial/medical matters (including all dramas relating to the IP, long story), and would like to see the debt paid off ASAP.

    I have since recovered & rebuilt my life. With my supportive partner’s help, I’m learning to become financially savvy. One day, if & when my health deterioates, I would still be able to have a good life, instead of becoming a burden to my family/society.

    We moved into this property Sept last year, because the rental we were living in got floorded (another story). We did the mathes & it makes the best sense to turn this IP into a PPOR, until we figured out the next step.

    We have since done a beautiful job with the reno (not cheap, but wasn’t a huge fortune either). The 20ks allowed for the bathroom was mainly because it is smallish & odd measurement, so most things will have to be made to fit. We also need to water-proof the whole thing. We do keep in mind not to over-capitalise such project.

    I would like to get the place evaluated once it’s all done. Similar properties in the same area/building are selling in their high 200ks to low 300ks……..

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
    Post Count: 1,086

    I habe not done a bathroom in oz for a couple of year but agree with the others that 20K is a bit step. Having said that bathroom is a very important area and it would pay to consult widely about what buyers in your price bracket expect.

    I Buy Property http://www.cashflowproperties.co.nz

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
    Email Me | Phone Me

    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    salsachinita, it may be better to do as Derek suggested and buy your father out now. This will make things easier for you – especially if you are going to want to keep on withdrawing equity every few years. Maybe buy his share with a new trust?

    There may be affects with your father’s pension (if he is getting one). If he isn’t retired yet, this may held him qualify for more pension down the track too – less assets and income.

    But your dad may have to pay CGT now if you buy him out.

    Stuart, think you meant appointor rather than settlor. Settlor is the person who gives the initial money to be held on trust (usually $10), appointor is the one (or more) who controls the trustee.

    Terryw
    Discover Home Loans
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    Profile photo of Stuart MilneStuart Milne
    Member
    @stuart-milne
    Join Date: 2006
    Post Count: 196
    Originally posted by Terryw:

    Stuart, think you meant appointor rather than settlor. Settlor is the person who gives the initial money to be held on trust (usually $10), appointor is the one (or more) who controls the trustee.

    Aah Yes that’s the one. I could never get those two right. Not to worry at least they both end in “OR” !!

    And it would probably be a workable concept although there could potentially as Terry mentioned be Taxation issues and for this reason you would need to speak with an Accountant to find out more. They shoule also be able to assist you with the Trust concerns too.

    Stuart Milne
    Non-Conforming Specialist
    READY Mortgages
    http://www.readymortgages.com.au
    [email protected]
    Mob: 0404 056 055

    Profile photo of salsachinitasalsachinita
    Member
    @salsachinita
    Join Date: 2005
    Post Count: 34

    Thankyou, everyone, for your suggetions!

    Yes, the CGT issue is indeed what’s been holding us back from buying my Dad’s share. He is not retired yet but will be within the next decade. He probably would not qualify for pension (too much assets, not enough super etc) so he never counted on it.

    Re bathroom costing 20k….that’s a generous estimate. We got quoted anywhere between 13ks to 20Ks; NOT including fittings [stun]…….. we would like to do justice (ie maximise) to the space we’ve got, nothing overly posh, but nothing dodgey either. A leaky bathroom in an apartment would be an expensive nightmare……!

    The quoting process continues, while we are saving towards the worse case senario.

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