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Parents IP transfer...

Discussion in 'Real Estate' started by archangelsupreme, 17th Dec, 2007.

  1. archangelsupreme

    archangelsupreme Well-Known Member

    Joined:
    7th Sep, 2007
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    Location:
    Australia
    Hello,

    My parents currently have an IP (worth $500k+) which they want to transfer to me. There's still about $150k on the mortgage.

    I understand that there will be a Stamp Duty cost (probably around $25k) and I'll need to take out a loan to cover the mortgage and the stamp duty.

    Are there any other costs I should be aware of?

    If the IP is transferred to me, would this be considered a first property....will I still be eligible for a first home owners grant if I purchase another property?

    This IP is currently being rented out....and my parents will still continue to help me with the repayments (i.e. this is just a formality of changing names). Are there any issues or points I should be aware of?

    Thanks
     
  2. DaveA

    DaveA Well-Known Member

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    cgt on their behalf.....

    you wont loose the 7k FHOG but you will loose the FHOG stamp duty exemption which can be worth a pretty dime (13k for me)....

    Question will lead, with a small mortgage like that it will probably be cash flow positive. Would it maybe be better for you to purchase it off them. Get at loan @ 60-70% and then get them to gift the loan value back to you and you can use the cash to service the loan and expenses (if it runs negative) or to put into shares, or even put into another deposit. You could transfer it straight and then draw a LOC but why would you give up the opportunity. You could also write a loan contract between you and your parents for the remainder of the value of the property as a way to convert non deductible debt into deductible debt. Example could be, you have a loan with them of 200k (paper loan, no interest) and when you go to buy your 1st Home, you borrow 200k and repay your parents who then gift back your money which you can then use for a deposit on your first home.

    However use ur accountant to bounce ideas off. There are plently of large firms who make megga $$$s by structing deals for big companies. If large business use them maybe its a sign that an individual should pay money for proper advice. Usual disclaimer....
     
  3. archangelsupreme

    archangelsupreme Well-Known Member

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    Sorry, i'm not sure as to what you mean by "give the loan bac"k to me.

    If I can't get the FHOG Stamp Duty exemption.....would I be better off buying an investment property first (to claim all the FHOG) and then transfer my parents home to me latter?

    BTW what is the FHOG Stamp Duty exemption....can I use that to pay for the stamp duty if i transfer my parents IP over now?

    Also, can you please explain more about buying the house from them....wouldn't that mean I have to get a loan of $500k+.
     
  4. DaveA

    DaveA Well-Known Member

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    yes if you borrow the 500k but then get them to gift the money to you it becomes more tax effective

    longer you wait to transfer it more in stamp duty, however if you then get the FHOG it may be worth it.

    Otherwise maybe a DT would be a good idea, with that little loan it should be cash flow positive and this would be your most effective way...

    Again seek specialist advice...
     
  5. archangelsupreme

    archangelsupreme Well-Known Member

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    Sorry, what's a DT? can you please elaborate..

    Sorry i'm new to all this
     
  6. AsxBroker

    AsxBroker Well-Known Member

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    DT = Discretionary Trust
     
  7. Bricks & Mortar

    Bricks & Mortar Member

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    Melbourne, Vic
    If your parents are transfering it to qualify for the pension, I believe they have to gift five years before they retire otherwise there is a certain amount that they are allowed to gift to you... If they are flushed with funds then indeed your very fortunate.
    Costs would involve, Solicitors/conveyancers, Stamp duty, Capital gains tax, and associated costs when getting mortgage.

    I believe if you keep this solely as an investment property, you will still be eligable for the FHOG etc provided it is still on offer from the serving Govt.
    Alternatively you may buy this as you PPOR, but better check if there is a maximum value its allowed to be first.
    You can still rent it out up to 11 months but must move into the dwelling after that period for a approx a year, before you can change it to an IP, otherwise you will forfeit your grant. If you have extenuating circumstances you can apply to revert it to an IP early, but will need to document and get it authorised.
    You will need to live back in the property within each six year period to retain it as your PPOR.

    The market value of the property should be realistic, a valuer or real estate appraisal should be sought as you can't just fudge the figures to pay a lower stamp duty and CGT.

    A trust structure will not avail you to sell your property without a CGT bill if you buy it as a PPOR, but has different benefits

    If your buying as an investment property, your claimable interest would be minimised if you don't take out a loan to 80% of the value of the home. Hence the suggestion to get a loan to the max from DaveA

    Despite the likelyhood of interest rate rises in the near future, perhaps a offset would best service your needs, as it can also be utilised for serviceablity or purchase of an additional property, whilst being able to claim the full interest..... If its a PPOR your unable to claim any interest!

    IP or PPOR, Either way to be handed a property of that value is a huge plus
    so make sure you thank them and look after them!

    cheers

    Timm
     
  8. archangelsupreme

    archangelsupreme Well-Known Member

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    Location:
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    Hello all,

    Things are starting to get really serious now, this is actually going to happen and I need some advice on how to proceed.

    Based on the above and from what I know; costs include:

    * Stamp Duty
    * Mortgage costs
    * CGT

    I'm not really sure of what option i should take, and how to go abouts getting things started:

    When this house is transferred to me, should i just keep it as an IP (that way i can still be eligible for FHOG....though how about the FHOG Stamp Duty Exemption? do i forfeit that immediately)? Is there any benefits in me making this as a PPOR?

    As far as I know, my parents still own $125k or so on their mortgage....how abouts do I get the name transferred to me....is this the correct step

    1) Go to Real Estate seek valuation of property

    2) Take the lowest valuation and go to the Bank to obtain mortgage to cover for that $125K my parents still owe (or is it $500k? which is our predicted value of the house)...this is the part i'm confused about....i'm not exactly sure, what sort of refinancing is this...

    3) Apply for land (house?) title change. Pay tax

    ================

    I've just started work and am not exactly sure what options is most effective.

    Need your help desperately...

    Thanks.
     
  9. samaka

    samaka Well-Known Member

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    Sydney
    Speaking about the FHOG - I'm hearing rumours that Rudd's home deposit savings account may involve the removal of the existing FHOG. I personally don't think it will happen - but I guess there's a chance - so you may want to take what you can get while you still can.