All Topics / General Property / Is selling ppr the right idea at seperation?

Viewing 18 posts - 1 through 18 (of 18 total)
  • Profile photo of tigermigertigermiger
    Participant
    @tigermiger
    Join Date: 2010
    Post Count: 44

    To kick start property investing on my own, (without knowing the nitty gritty details), would it be more beneficial to

    1) Sell the ppr brought with ex-fiancé and purchase my own ppr or should I be buying an ip and rent instead

    2) Buy out my ex-fiancé share on the ppr and live there, save and then try to buy an ip

    3) Buy out my ex-fiancé share and somehow purchase the existing ppr and rent it back to myself?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Tiger

    Hate to say they have all have their own pro's and cons for so many different reasons.

    I guess it all boils down to your own goals and objectives

    Without actual numbers it is difficult to comment.

    Cheers

    Yours in Finance 

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of vagirl2012vagirl2012
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    @vagirl2012
    Join Date: 2012
    Post Count: 47

    Yes, without a bit more info it's a bit hard to offer anything sorry.  They all have their good points and bad points and it's really going to come down to what you want out the other end.

    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
    Post Count: 1,404
    tigermiger wrote:
    To kick start property investing on my own, (without knowing the nitty gritty details), would it be more beneficial to

    1) Sell the ppr brought with ex-fiancé and purchase my own ppr or should I be buying an ip and rent instead

    2) Buy out my ex-fiancé share on the ppr and live there, save and then try to buy an ip

    3) Buy out my ex-fiancé share and somehow purchase the existing ppr and rent it back to myself?

    1- depends where it is, what the rent is and what rent you'd get on an IP in a different area.

    2) If it's  where you want top live and it's not an area where it would be more beneficial to own an IP elsewhere.

    3) Not legal so NO!!!

    So in other words- without knowing the nitty gritty- Who knows?

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

    Ha ha – how can you rent to yourself?

    If you are separating as in a relationship breakdown then there are stamp duty exemptions so you may be able to acquire this property if full. If you sell and buy another then you would be up for stamp duty again. Factor this in.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of tigermigertigermiger
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    @tigermiger
    Join Date: 2010
    Post Count: 44

    Sorry for my slow reply… I'm trying to keep the relationship but it's not going well ;-(

    I do like the area to live and would be happy to live in the house after our relationship breakdown. We built the house 5years ago in Victoria – house title and Commonwealth loan (p&i) is in both our names. Home loan amount is at $205k and houses of equivalent for sale is advertised  approx $350k.

    i would like to buy out my ex fiancee with all intentions to live there but if after a few months I can't afford to stay I will rent it out instead.

    How do him and I agree on a house value? Am I best to approach 2 real estates to give a letter stating the value and then take the average from the two?

    How do I go about & what is the best way for me to structure a new loan in my name solely and remove him from all things related to the house?

    thank you.

    Profile photo of PLCPLC
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    @plc
    Join Date: 2012
    Post Count: 400
    tigermiger wrote:
    Sorry for my slow reply… I'm trying to keep the relationship but it's not going well ;-(

    I do like the area to live and would be happy to live in the house after our relationship breakdown. We built the house 5years ago in Victoria – house title and Commonwealth loan (p&i) is in both our names. Home loan amount is at $205k and houses of equivalent for sale is advertised  approx $350k.

    i would like to buy out my ex fiancee with all intentions to live there but if after a few months I can't afford to stay I will rent it out instead.

    How do him and I agree on a house value? Am I best to approach 2 real estates to give a letter stating the value and then take the average from the two?

    How do I go about & what is the best way for me to structure a new loan in my name solely and remove him from all things related to the house?

    thank you.

    Best option would be getting a valuation done. That way you should get a proper market value, and if you do rent it out you have proof for CGT purposes if it comes time to sell later down the track.

    Have a solicitor do the paperwork for buying out his half to avoid any issues and then take out a loan in your name only, preferably IO as you may rent it out.

    A decent broker can help you out on the above, including the valuation.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
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    Melbourne based Mortgage Broker | Making Finance Simple

    Profile photo of tigermigertigermiger
    Participant
    @tigermiger
    Join Date: 2010
    Post Count: 44

    Thank you Tom.

    I had a real estate agent come our last week who mentioned the house would be around $310-330k (which is less than i anticipated after googling around on realestate.com.au)

    I have two more agents coming this week.

    Profile photo of Hari YellinaHari Yellina
    Participant
    @yellina
    Join Date: 2007
    Post Count: 101

    Dear Tigermiger, 

    I have a friend who has gone through the same process. 

    How to approach

    • Get an independent valuer. 
    • Goto comm bank and ask for Valuation and they have a free valuation for their customers who are looking to purchase a new property. 
    • Get appraisal letters from real estate. Tell them you are look for selling house for market price. and they have to give you a fair valuation. 
    • Buy a price guide from Home price guide. This will give you exact picture of what price the properties are sold in you area and street. This is the same price guide used by agents. 

    Now you can approach you partner and tell him or her, you are willing to sell this to him or you would like to buy it. You will need to spend atleast $500.00 to make sure you are buying at a right price and the other half is receiving the fair share. You will have explain him. or email him the pros and cons. 

    Advantages 

    • Get at the same market price 
    • No real estate commission. (now you can share the commission) this is more attractive scenario. 
    • No stamp duty while getting it transferred on your name.
    • No time spent in looking for buying a new house. 

    Once you have agreed on price and who is buying it. Please approach your bank and they will transfer it on your name and he will have nothing to do with the house. 

    Please do post again if you have any more questions. 

    Hari Yellina is keen property Investor and researcher.  

    Hari Yellina
    Email Me

    Keep Investing - Grow while Resting.

    Profile photo of tigermigertigermiger
    Participant
    @tigermiger
    Join Date: 2010
    Post Count: 44

    The house figure to buy my ex out has been agreed and I think my next step now is to get a home loan solely in my name.

    Because I am not sure if I will rent it out or live in there, am I best to get an I.O loan?

    My mum has generously offered to but her savings into my offset account (as she is currently taxed too much), provided I get a will prepared to outline that it is her money. Can anyone see anything wrong with this? I believe if it is in an offset account, I can take her money in/ out whenever she asks for it and I won’t get penalized and while it is sitting in their it is helping me?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190
    tigermiger wrote:
    The house figure to buy my ex out has been agreed and I think my next step now is to get a home loan solely in my name.

    Because I am not sure if I will rent it out or live in there, am I best to get an I.O loan?

    My mum has generously offered to but her savings into my offset account (as she is currently taxed too much), provided I get a will prepared to outline that it is her money. Can anyone see anything wrong with this? I believe if it is in an offset account, I can take her money in/ out whenever she asks for it and I won’t get penalized and while it is sitting in their it is helping me?

    IO loan would be best as it allows you to maintain a high loan balance and with the offset you can still achieve interest savings.

    There are many issues with the mum’s money. She should seek legal advice. At the very least you need a written loan agreement and consider what would happen to her money if you:
    died
    became insane/into a coma
    separated
    went bankrupt – she would be an unsecured creditor.

    Also having a will won’t help her as it is her money. You can’t leave her her own money – she would be entitled to the money back anyway. However it is still a very good idea to have the will and there may be a few strategies which could be employed

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

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

    Profile photo of Hari YellinaHari Yellina
    Participant
    @yellina
    Join Date: 2007
    Post Count: 101

    Dear Tiger Miger,

    If your mum's money is sitting in your account. It will definitely decrease the interest. following are the few recommendations. 

    • Make sure you have a written agreement. Stating that the money belongs to her. 
    • Please update your will with her, entitling the money if some thing goes wrong. 

    In my perspective you are doing a right thing by buying the house from your partner. You are saving him lot of cost. Hope he realizes that. 

    Good luck. 

    Hari Yellina 

    Hari Yellina
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    Keep Investing - Grow while Resting.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190
    yellina wrote:
    Dear Tiger Miger,

    If your mum's money is sitting in your account. It will definitely decrease the interest. following are the few recommendations. 

    • Make sure you have a written agreement. Stating that the money belongs to her. 
    • Please update your will with her, entitling the money if some thing goes wrong. 

    In my perspective you are doing a right thing by buying the house from your partner. You are saving him lot of cost. Hope he realizes that. 

    Good luck. 

    Hari Yellina 

    Hari, if it is mum’s money it won’t fall into Tiger’s estate.

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

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

    Profile photo of Mark CoburnMark Coburn
    Participant
    @mark-coburn
    Join Date: 2006
    Post Count: 181
    tigermiger wrote:
     Sell the ppr brought with ex-fiancé ….. and should I be buying an ip and rent instead 

    Bingo! Tiger,

    Renting where you want to live and investing where the market is moving can give you the best of both worlds. We call them professional renters for good reason.

    We have a client CJ (who won't mind saying this): 28yo, self employed, single female, earning less than $90,000p.a. living in a rented apartment (that would be worth $900k) and pays $350 per week for her share. Living the good life and while saving a bit too. CJ has just bought another 2 investment properties with us in the last 2 months. One is an 2 bedroom apartment and the other is a 4 bedroom house. That brings her number of properties to 4, 3 houses and 1 apartment.

    At this point CJ will be able to buy again 18 months. All her properties are positively geared and she plans to buy 2-3 more investment properties before she buys a PPoR. She made her first investment 5 years ago and will be able to retire on over $2000p.w. by the time she is 45. Of course I think CJ is smart but her friends think she is a millionairess (all by careful saving and smart investing).

    If you delay buying your PPoR and invest first, your ability to continue buying (serviceability) is going to let you grow your wealth much, much faster. Once you take the luxury of moving into your own home, you holt your ability to save and it often takes 5-10 years before there is enough money spare to buy that next property. The outcomes are as different as black and white.

    Mark Coburn | Coburn & Co - Investment Advisors & Buyer's Agents
    http://coburnandco.com.au
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    |Ph: 0405 243 547 | Property Investment Advisors |Mortgage Brokers|

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,376

    Hi Miger,

      I totally agree with Mark :-

    Quote:
    Renting where you want to live and investing where the market is moving can give you the best of both worlds

      With an IP in an area where it "works best" (i.e. +ve geared) and the income from it decreasing your rental cost (plus throw in Depreciation, etc to get Tax benefits) and you renting "where it suits you to live", indeed is a great way to go.   Someone once said "You pay a huge premium to want to live in your own home" – not sure just who it was, but it makes sense to me.   If I had my time over, I'd certainly head in THAT direction (buy an IP first, and rent for myself).

      Of course, in YOUR situation, there can be extra benefits to perhaps holding on to what you are looking to purchase –

    Quote:
    1) Sell the ppr brought with ex-fiancé and purchase my own ppr or should I be buying an ip and rent instead

    2) Buy out my ex-fiancé share on the ppr and live there, save and then try to buy an ip

    3) Buy out my ex-fiancé share and somehow purchase the existing ppr and rent it back to myself? – See more at: https://www.propertyinvesting.com/forums/general-property/4349241#new

     Perhaps one more?

    4) Should I be buying this place as an IP and rent a place for myself instead

    e.g. what if you bought it (already nominated as your PPOR, then rented it out – the PPOR rules say you can rent it out for up to 6 years without losing your CGT exemption!!).   Anyway, this path would depend on a number of answers to questions (will it rent well?  Will it be cashflow +ve?  Can I afford to hold it AND rent elsewhere?  Do I WANT to stay here and keep it as my own home? Can I move back into it near 6 years to "restart the clock" re being my PPOR, etc.)

      Whatever you choose, do seek out the right information re "the rules" prior to making your decision.  

    Benny

    Profile photo of tigermigertigermiger
    Participant
    @tigermiger
    Join Date: 2010
    Post Count: 44

    This is really hard to go through day to day things at the moment let alone think about the future……

    For the time being, i will live in the house.

    If I take out a Interest Only loan in my name and have an offset account attached to it- is this okay???

    Then, when i am in a better head space, i can think about everything else eg; maybe renting it out and mum's generous money.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,376

    Hi TM,

    Quote:
    If I take out a Interest Only loan in my name and have an offset account attached to it- is this okay???

      I love what Offset/IO loans can do for us.  As such, it sounds ideal to me – but, I am not a mortgage broker, nor any other qualified adviser – so do be guided by what others on here with the right credentials might suggest.  

    As some have already mentioned, it might not be quite "cut and dried", so do seek advice re setting it up. 

    As you say, this will buy you time to think and plan for your next move.  Good luck with it, smiley

    Benny

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Interest only and Offset sounds like it will help you out a lot in this situation. Put any extra funds into offset to maintain the maximum deductibility should you make it an investment property.

    I've had quite a number of separation deals in the last 12 months, overall the majority of deals results in one partner buying out the other. The selling and buying costs eat up a substantial part of the equity left, so it generally makes sense.

    Outside of the financial sense, it sounds like you're taking this from a practical perspective, giving yourself time to look at your options as life progresses. Keep up the good work.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

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