Hi Everyone,
My father brought a townhouse for $415,000 in Brisbane about 2 years ago. My sister moved into the property and her and the de facto have been renting there since. They are getting married in May and have decided they would like to purchase half the townhouse from my father. They love the place and want to stay there without sacrificing their current living standards. They love the location and the unit ie, they do not want to move into something smaller and cheaper and try to go it alone. The value of the townhouse has increased by about $65,000 since it was purchased bringing the current value to about $500,000.
Alright, now that I have the details out of the way, what is the best way to go about this? Will they only have to pay half the original purchase price or half the current value? Depending on the outcome, will my father be subject to CGT based on the sold portion? How could you set this up legally to protect each party from being potentially burned? What sort of loan structure would be best suited? I have a million questions so maybe it is easier if someone just puts themselves in my fathers shoes and explains how they would setup such an agreement and things to look out for etc.
Cheers,
DanCan noone give me any information or advice? :o(
Is my post that boring?
The price will be whatever the two parties agree for it to be. There is no set requirement.
I personally don't like the idea of half shares. I would be happier if they could buy it outright. Perhaps they are happy to have the father subsidise their cost of living but the arrangement you suggest will not help either party if they later want to sell or buy something else. I wont discuss this any further.
If your father never lived in this house then he will be subject to CGT on the profit that he makes on the half he sells. As he has held it more than 12 months he will get a 50% discount.
They simply need to have a contract drawn up by a solicitor and then have it signed by both parties. Finance will need to be arranged and it will have to be a joint loan between both parties as the sole title is jointly owned. Unless of course your sister can pay cash.
It will then settle and you will have the property being owned by both parties. There will be payment of SD on the half share by the sister. I am not sure where she stands with then FHOG – the solicitor will know.
This is not a whole lot more different to just buying any property except that two parties will be on title.
I certainly wouldn't consider this myself unless it was to help a family member out. Causes more trouble than it is worth.
Can she manage to buy it all? Perhaps your father may help her by providing her an interest free loan for a portion for a set timeframe or similar? It all depends what he wants to achieve with this property. Does he even wish to sell it?
Perhaps his account and/or solicitor can come up with a better idea if all he wants is to help your sister into the property.
Hope this helps and sorry I didn't respond sooner.
With regard to determining current market value (or what your sister & +1 should pay), engage a valuer (not a real estate agent) to prepare a fully documented valuation. This will serve to protect all parties with regard to certainty for the price, certainty for the value for CGT etc. How he then decides to dispose of half will depend on him, does he sell to them at no increase (no cgt but no profit for hiim and upsets you by not giving you the same benefits) or transfer at the current rate (some cgt liability but he should have sufficient funds to pay it when the bill arrives, this leaves you in no better or worse situation than the present).
What are your father's plans for the other half? Keep & will to yourself/other siblings, transfer his share to yourself etc? This will assist in how to transfer to your sister ie tenants in common (between your father & sister/partner) allows your father to pass his share on to others (like yourself) when he dies, if he goes about it as joint tenants then the other parties will inherit the property on the death of the other ie it might come back to him if your sister & partner are killed before his passing. The family solicitor should be able to work this out (and get the wills done at the same time).
I'm in a similar situation but I own the house and grannyflat that my bro and his wife want to buy into. I have looked at it from every angle and can't see how and can be a win win situation for both parties. They can't afford to buy the place without my help but i'm an investor and when there is growth I want to be able to access my share of the gain.
You really need to find out your fathers goals in purchasing the unit. He shouldnt' be pressured into 'doing the right thing for his kid'. He may've considered it his nest egg to sell at a later date to become a grey nomad. He might want tennants to help pay for the thing. He might become an invalid in his old age and has to sell the unit to afford a live in nurse. . He might want to draw down the growth to reinvest. Frankly I can't see one financial benefit for your father other than 'helping out the kids'. I hope he doesnt get called 'MIser DAd' just cos he doesnt like teh idea.
Tell your sister to buy a house where they CAN afford in ipswich or beenleigh or somewhere. and then rent a unit in the city. SHe gets all the tax benefits of owning an investment house and by renting she wont have to maintain the thing and gets to live where she likes at a price much lower than mortgage repayments.
Hi Dannards
Sorry for the lateness of my reply being in the UK on holiday makes it hard to keep up with posts as regularly as i would like to.
Simon has given a good reply but if you want any further information fel free to drop me an email and i can answer you in greater in depth when i am back in Brisbank in a fortnight.
Richard Taylor | Australia's leading private lender
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