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  • Profile photo of Nue1Nue1
    Member
    @nue1
    Join Date: 2013
    Post Count: 32

    Hi all,

    I need all of your help to setup myself or any opinion will be greatly appreciated.

    Due to an unfortunate of my family issues and problems, I now have debts that will need couple of years to recover from. I cannot do any home loan (that's what I believe), and I only have 14k in savings.

    My plan is for me and my friend(s) to join together, using friend's only for the loan (friend has no debts at all), we will both 50/50 put deposits for the property together + stamp duty + lmi + other costs, everything will be 50/50. The property will be either both in our names or just my friend's name.

    What structure do you think will work out best for both of us?

    What legal issue we will face if we happen to cut our ties or sell the property or go our own way?

    Which structure is best for tax benefit?

    Thanks in advance.

    Nue1

    Profile photo of mattstamattsta
    Participant
    @mattsta
    Join Date: 2011
    Post Count: 604

    I strongly suggest you have the property in both your names. If it's just in your friends name, and something goes wrong, you may not be able to property exercise your rights to the property.

    I think you should write up an agreement in advance about termination, and you could talk it amongst yourselves and get a lawyer to help you fine tune it.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    As mattsta mentioned both names is favourable.

    Course couple of other entity arrangements might be worth considering

    You won't find any lender allow the property to be in joint names and only your friends name on the loan application.

    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 Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    You have debts that will take you a couple of years to recover from… why not hunker down and clear those debts first?

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,681
    JacM wrote:
    You have debts that will take you a couple of years to recover from… why not hunker down and clear those debts first?

    Yep and the world will be still going round and round and there'll still be property to buy and sell.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    I would suggest you consider to buy under friend's name only. You can set up structures which will cost money and result in cashflow issues or just keep it simple. Joint names would mean you on title too – that may be possible or may not considering your debts. If it won't hold you back then both names, if it will then friend only with you assisting. You can then have an agreement drawn up so as to split expenses and profits.

    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 streamlineinvestingstreamlineinvesting
    Participant
    @streamlineinvesting
    Join Date: 2010
    Post Count: 171

    Definitely recommend getting rid of the debt first, I know it may put off your RE dreams off for a bit, but no point adding a lot more debt to what you already have. Financial stress is not something you want to put onto yourself if you can help it. 

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    Would depend on the rest of your situation but it buying a property in a location that has had historical growth and you are not going to be worse of cash flow wise then go for it.

    Definitely buy in both names 50/50 split.

    First step would be to chat with an MB to see if you are even in the game and any decent one will advise you on how to get there if you are not ready which may involve paying out your debts first. 

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
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    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of Nue1Nue1
    Member
    @nue1
    Join Date: 2013
    Post Count: 32

    Hi all,

    First of all, thanks for all the inputs.

    The reason why I want to start now and don't want to (well I can at the same time) reduce my debt is, I plan to buy my first IP, then after considerable amount of time of holding (1-2 years), I can benefit from capital gain (not negative gearing, aiming at positive gearing or neutral), then sell the property off for capital gain to reduce my debt, or keep holding the property, release the equity out and buy another property, rather than keep savings and savings and pay the debt off. Well of course, that is depends on the location whether or not is it a good capital growth area. Due Diligence.

    And yes, there are upside and downside to this strategy of mine, I can just put all these savings I have at the moment and close all the bad debts, but my thought is why don't I benefit from property and invest first? I can continue to save money after I buy the property at the same time.

    I might have to speak to mortgage broker out about whether my debts will bring down the borrowing power or not. If not then I will go for joint names, if yes it will affect the borrowing power I will get my friend to be the sole owner with agreement contract behind that.

    Question is how much will it cost my friend and I to obtain this agreement contract and from who? Solicitor? Lawyer?

    Thanks guys.

    Regards,

    Nue1

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173
    Nue1 wrote:
    Hi all,

    First of all, thanks for all the inputs.

    The reason why I want to start now and don't want to (well I can at the same time) reduce my debt is, I plan to buy my first IP, then after considerable amount of time of holding (1-2 years), I can benefit from capital gain (not negative gearing, aiming at positive gearing or neutral), then sell the property off for capital gain to reduce my debt, or keep holding the property, release the equity out and buy another property, rather than keep savings and savings and pay the debt off. Well of course, that is depends on the location whether or not is it a good capital growth area. Due Diligence.

    And yes, there are upside and downside to this strategy of mine, I can just put all these savings I have at the moment and close all the bad debts, but my thought is why don't I benefit from property and invest first? I can continue to save money after I buy the property at the same time.

    I might have to speak to mortgage broker out about whether my debts will bring down the borrowing power or not. If not then I will go for joint names, if yes it will affect the borrowing power I will get my friend to be the sole owner with agreement contract behind that.

    Question is how much will it cost my friend and I to obtain this agreement contract and from who? Solicitor? Lawyer?

    Thanks guys.

    Regards,

    Nue1

    A solicitor is a lawyer and only a lawyer can prepare deeds and agrements. Could be $1200 to $2000 or so for such an agreement.

    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 Nue1Nue1
    Member
    @nue1
    Join Date: 2013
    Post Count: 32
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