G’day Everyone,
I have some questions in my mind that I am a a bit confused to answer and was hoping to get some help here. Here it goes;
1. I have been told buying in partnership is a BIG no no by my mortgage broker, exception if its your spouse, not even your parents and reason being, the bank will look at the total loan owning not my portion and my equity will be only my portion. Would love to hear from anyone who bought in partnership other than your spouse and some experiences? Also how true is that statement?
2. I am a first time investor and was wondering if I should go for commercial or residential at budget $450k ?
3. In the last few months I was looking at north suburbs in Melbourne with bit of land but I have been told instead to go to east side (malvern, south yara etc) and buy a 2 bedroom unit, one’s with 4 – 6 in a block and not more (old type properties), but I have been always inclined to some land, would love a genuine feedback on this.
Appreciate your help in advance.
thank you
VizHi Viz,
1. I have been told buying in partnership is a BIG no no by my mortgage broker, exception if its your spouse, not even your parents and reason being, the bank will look at the total loan owning not my portion and my equity will be only my portion. Would love to hear from anyone who bought in partnership other than your spouse and some experiences? Also how true is that statement?
1. I think the statement you are talking about appears on a contract showing each partner to be “jointly and severally liable” for the mortgage (which in today’s English should be read as “jointly and separately liable” – i.e. each one owes the whole amount as well as owing it jointly with the other).
And so we end up in the situation where (because you jointly own a property) that you will only be apportioned HALF of any Income. But, since you are also SEPARATELY LIABLE for the mortgage, the WHOLE amount is owed by you (yes, AND your partner too).
Talk about the Bank “having its cake, and eating it too”. But yes, it is often true – look out for that phrase whenever you go sign a contract in partnership with another person. This phrase can severely slow down both parties from further investing (unless you can find an investment where the Income is SO HUGE that it doesn’t impact you to owe double the cost).
2. I would think that the smaller amount might limit you to residential. I have heard that commercial requires deeper pockets (but then, I haven’t any knowledge of commercial investing, so I don’t really know….)
3. Me too – I prefer larger land content. But, if going to buy an apartment, then I also would want an older (often larger) apartment in a prime rental area rather than a new one in a tower.
Good luck with your hunting,
Benny
Joint and several liability from joint borrowing with non spouses is definitely an issue which will destroy most borrrowers borrowing capacity – so it’s a prudent piece of advice to try avoid these types of arrangements.
With 450k borrowings – there is going to be a lot more quality residential than commercial properties. Commercial also requires larger deposits, so if you’re deposit constrained you may not be able to borrow anywhere near what you can with residential properties.
I’m personally more of a fan of property with a land component than a unit, as units can always have an increase in supply in the area and put downward pressure on prices, whereas houses with land in the right area will only see a long term upward trend in demand and prices.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Thank you Benny & Correy, really appreciate your reply, I was hoping someone would reply on my topic as its been few days, so I really appreciate the help.
Buying in joint sounds like a tricky one, so I will go solo, I am more comfortable with that plus owning it myself would give a better pride in owning an estate.
I saw some office spaces which is why I thought of commercial but than I guess vacancy rates of that would be high too.
It’s so hard deciding where to head, but I think I might stick to house with a piece of land according to the reply to this post.
thank you
VishalThere are also some tax and legal reasons not to buy property jointly.
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
Thank you Terry. Just surprised as I know a number of people who have bought in joint, glad I cam here.
thank you
Vishal
You must be logged in to reply to this topic. If you don't have an account, you can register here.
