Our two married sons live with us as extended family and it's starting to get crowded with grandkids arriving.
We would like the grandkids to grow up in the same area and attend the same schools as their parents did.
Unfortunately home ownership for our kids isn't possible in these areas, however using a traditional mortgage and rebuilding our existing place as a two-story house with attached granny-flat would give us three separate residences which would be fine.
Redeveloping the block into three two-story town-houses with separate titles would possibly also be another option.
Our current plan is to remortgage the property adding 100K for the extensions to the existing loan of 120K. One of our sons is a carpenter who would handle the build.
We all work blue and white collar jobs, some of us are fulltime permanent, others permanent casuals.
What would be the best way to arrange our finances to achieve this?
Would a family trust be beneficial?
Would some sort of business be beneficial?
We would really like some advice on this, we are not looking to get rich from property development but equity can not be ignored.
Seeing as how this hasn't garnered any response yet, I'll try and unpack it a little and see if that might prompt some of the experts here to chime in.
Note I am not an accountant or financial advisor.
The biggest, and by far most important issue, is the social/personal one. This is only something you and your kids can answer, but I can imagine getting everyone on the same page for a multi-decade project like you are describing would be challenging. I know from my own family that sometimes younger people want to stand on their own two feet, even though that level of independence results in a lower quality lifestyle (guilty your honour).
Add spouses into the mix and I imagine there must be lots of competing priorities.
I start with this, not because I am trying to dissuade you, but because as the leader here you must accept that you could do all the work you are envisioning, then in 5 years be told it isn't working out by one of your offspring, so you need to consider how such a response would affect your relationship and your relationship with the other kid. I have seen families where the patriarch commits everyone to a mission (usually a family business) that ends in bitterness and feelings of betrayal years later. You obviously don't want that!
On to the financial considerations. I am assuming that the property as it stands is worth a goodly sum, on the way to $1m at least, otherwise the contortions you are contemplating aren't really justified.
I'll take your word on what it costs to do the renovations you anticipate, but $100k looks pretty thin. That is the kind of budget I would expect for a granny flat alone, but I guess you will all contribute some labour.
So assuming you can manage the payments on a larger loan, which should be very manageable across 6 adults, the finances look pretty easy.
Your hardest decision will be how to handle stamp duties, future capital gains and possible land tax. If you divide up into 3 townhouses, you either retain ownership of all 3 yourself, holding two blocks as an investor with CGT implications in future, or your transfer them to your kids, with stamp duty considerations. I think both are a poor choice.
Similarly, placing the land or some split up titles into a trust would have the same stamp duty costs. A trust also pays land tax at a lower rate in QLD than individuals. The benefits of a trust are you can divert any income to the lowest taxed beneficiaries, which is not super important in this case as income generation isn't the goal, and you can protect assets from litigation/divorce.
With the tight family you describe, and normal jobs, the risk of these is up to you, but I would suggest that a trust would be a waste of time.
My suggestion is that you do your renovation and add your granny flat to the house as it stands, with you retaining all ownership. You can charge your kids room and board if you want, but I would keep that informal rather than declaring it as income.
I would urge the kids to consider diverting the money they save from your generous living arrangements to investing in property of their own that they can subsidise by renting it out.
If they are diligent in 5 years or so they will have made a good dent in their investor mortgages, and will have the option to decide whether they continue as things are, or move out to their own place.
For you, this keeps the family close, allows you to subsidise their housing as long as they need it, adds value to your home, avoids any CGT or other tax issues and eventually allows you to pass on the wealth you have accumulated at your death, when there are favourable transfer arrangements with regard taxes.
For them, they get the security of always having a place to live with Dad, but the option of having a place of their own in future years. If you charged them board at the rate required to pay off the renovation loan, each would be paying only around $100 a week rent, allowing them to feasibly pay off $400 or $500 a week on an investment property in addition to what the rent brings in - making outright ownership quite possible within a decade or so even for premium real estate.