Hi. My husband and I would like to help our 20 year old son buy a well priced unit that we have found.
It would be an investment for him and/or first home down the track. The plan is to buy this using our
borrowing capacity, and to put his name on the title together with ours.The unit has been gutted and he is able to renovate it himself over a few month period with money borrowed
from his grandmother. He has the skills to do this and we can help him if needed. He will then rent out the
unit for approximately $250 to $270 per week while remaining living at home, working full-time while he pays
back his gran and saves a deposit. We are confident he can do this over a 12-18 month period.The un-renovated unit is available privately for about $195,000 and a renovated unit in the same small block
is currently for sale for $269,000 so it would appear there is scope to gain equity with a carefully budgeted
$10,000 renovation. The unit is in a desirable high capital growth area.Our real question is: What will the implications be for getting our names off the title so he can own
the unit in his own name only? Obviously we’d like him to take over the loan and pay us back in due course.
We could potentially have him listed as owner of the greater percentage of the property, but what would the
capital gains and stamp duty implications be? Or would we need to remain co-owners of the unit with him?Thank you in advance for your input and expertise!
G-
This topic was modified 9 years ago by
Geraldine M.
Changing title = stamp duty and CGT at market values. New loans too.
Can you lend him the full purchase price?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry.
Yes we had thought of that, but were a bit worried that it might impede our future lending over the next couple of
years, if he takes that long to save and repay/refinance. I don’t think it would make any difference with the
capital gain and stamp duty either would it, unless we bought it totally in his name? I don’t think we can do that
as it would remove our safeguards in the case of him not doing the right thing!G
If you could lend him the entire amount he could purchase the property in his own name. You should take a registered first mortgage to protect yourself (and him, from spouses, bankruptcy etc). Once he has it rented and when he gets a job he could refinance your loan with a mainstream lender and you will get your money back. This way there is no extra stamp duty or CGT to worry about.
The downside is that he may not be able to refinance – but but it wouldn’t be too hard to qualify for a small loan like that with the property rented and a small income.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If your son is working full time couldn’t he just take out the loan himself and have you as guarantors?
Cheers
AndrewsuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auThank you Terry and Andrew.
As my son doesn’t have a deposit saved and has only been in his current job a few months, I was thinking
he wouldn’t qualify for a loan. I had read that lenders require proof of savings for the deposit and a certain
length of time in your current job.However he has a good history of being steadily employed and able to repay/save for other big ticket items. We would
be able to lend him the deposit just as his Gran is lending him the reno money. The unit will be cashflow neutral or
even slightly positive when rented and as mentioned, my son is living at home so has minimal commitments – no car
loans etc.I will definately explore your suggestions!
G
If he has a job he may qualify for a loan on his own. There is only a need to show genuine savings if borrowing over a certain LVR – about 85% wit some banks.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If you’re able to lend him the deposit and serviceability permitting it may well be possible – done a few lately for parent’s helping their kids by lending the 10% deposit to them – all OK with the banks.
There is always the guarantee option providing security from a property held by the parents, but this does tie up the finances a lot more while the guarantee is in place.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thank you for your advice Corey, Terry and Andrew.
I just spoke to our accountant and he’s advising we lend our son the deposit and try and get him the
loan that way (as you’ve all said). Plan B could be to have my name on the title with our son, so
less profit is made if it is later sold as my income is a lot less than my husband’s. If he then needs
to refinance and have the unit transferred into his name, he is apparently only up for half the stamp
duty, and capital gains on his income.G
Assuming you own 50% with your son, this would mean you would be up for CGT on your share transferred to him. He would be up for stamp duty on the value of the share transferred to him – not 50% of the stamp duty that would apply on the whole property.
there is also the option for you to own much less than 50% to reduce both the CGT and stamp duty.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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