Looking for an Investment Property with My 20 Year Old Son

LDLDH on 09/09/2019 - 13:40

I am a single mum with 2 boys and have fully settled my mortgage on my small house. My elder son is 20yo and is in Uni and working at the same time.
I work part time, earning $50K/annum and son earns about $40k/annum.

I have asked him to save up for an investment home or if cant, I want to go into joint ownership with him.

Wondering if we can have joint ownership without using his First Home Buyers Grant.

As I am new to investment properties, I am also interested to know if if is a good idea to do joint ownership with son.
What if he intents to buy his new house next time with his partner, will he be able to use the First Home Buyers Grant for that.

Any advice is appreciated.

Financial

Comments

  • Baghern on 09/09/2019 - 13:51
    +1

    If you want more help, might want to provide your state, and where in your state you are looking

  • Some Human on 09/09/2019 - 13:52
    +5

    I was told you can't get the grant if one of your party has owned property before.

    • ESEMCE on 09/09/2019 - 13:59
      +3

      Correct, and if the sons' names go on the title, they will lose any future First Homeowners Grant benefit that they might want for their PPOR.

      • boomramada on 09/09/2019 - 14:10
        +2

        Correct based on this link https://www.sro.vic.gov.au/content/will-i-be-eligible-first-…

        edit, look like someone going trigger happy on negatives without any comments.

        • Some Human on 09/09/2019 - 17:08

          Why does it ask if one of the applicants will be a person? Can dogs and cats own property?
          Edit: I am 100% serious, why does it ask this?

        • arkie0 on 09/09/2019 - 21:08
          +1

          You are giving the god damn wrong information. I owned 2 investment property first and still got my FHOG after on a PPOR. I have called the SRO and spoke to them about the same situation OP is in (albeit as the son).

          https://www.sro.vic.gov.au/first-home-owner

          About half way down - You may still be eligible for the FHOG if you or your spouse/partner purchased property on or after 1 July 2000 and have not lived there as your home. For example, Tom bought his first property in July 2004. It was a house and Tom has always rented it out. As he has never lived there himself, this house is not considered to be his first residential home and he may be eligible for the FHOG.

          Every time they use the word home it refers to a PPOR that you have or intend to live in for 6 months. The OP is planning to buy an investment property, the link you provided refers to a home.

          More articles on the same thing.
          https://www.domain.com.au/news/investors-can-own-multiple-pr…
          https://www.finder.com.au/can-you-buy-an-investment-property…

          OP's best option is to call the SRO and ask them for advice on her situation if she wants to be 100% sure.

  • schmucky on 09/09/2019 - 14:01

    It depends on how you structure your purchase. It is possible to for PPR but will require you to use an adviser (an accountant that deals with these matters) should be able to pull it together (get lawyers to draft up agreements and sort out finance with lenders). It is not your run of the mill transaction. It will come down to whether you are willing to pay the cost for this advice as it doesn't come cheap. In most cases the benefits (stamp duty saving) exceeds the adviser costs.

  • k-rokfm on 09/09/2019 - 14:03
    +2

    Wondering if we can have joint ownership without using his First Home Buyers Grant.

    He wont be able to get the grant if he has an investment property
    You wont be able to use the grant on an investment property?

    Do you currently own your own home?

    • DLDH on 09/09/2019 - 14:05

      Yes

    • GnarlyKnuckles on 09/09/2019 - 23:28

      This is one of the current problems with OzB… peeps no longer seem willing/able to even read 'a few posts back', in a thread… so the same redundant questions are kicked around again and again, all within the same post.

      Did you read the actual post before asking this 'forkn' question?

      Specifically, this part:

      'I am a single mum with 2 boys and have fully settled my mortgage on my small house.'?

  • 87percent on 09/09/2019 - 14:03
    +6

    i would be speaking to an expert, rather than asking on here (no offence to the community)

    • crentist on 09/09/2019 - 18:40
      +1

      You take that back!

  • geek001 on 09/09/2019 - 14:03

    I don't think you can do what you suggested as the house your son will eventually live in will no longer be his "first" house.

    You can buy the investment property under your name though. I think you should be able to setup the loan so that you own the property, but both of you pay the mortgage. Please be aware that if your son defaults on the loan, you will also be liable for the default. Also note that if you died, your second son may have a claim to your properties even though he hasn't pitched in financially.

  • tallkid123 on 09/09/2019 - 14:04
    +1

    Talk to a broker. A lawyer as well if you want to pay for their time.

    I'd also maybe consider acting as guarantor for your son instead of joint ownership.

    • Typical16-bitEnjoyer on 09/09/2019 - 14:50
      +2

      No way. No point being a guarantor. All the risk and zero of the equity.

      • tallkid123 on 09/09/2019 - 15:37
        +1

        I understand. But this is a mother trying to get her son (who is both young and not earning a lot) over the line in terms of loan approval.

        • Typical16-bitEnjoyer on 09/09/2019 - 16:36
          +7

          this is a mother trying to get her son (who is both young and not earning a lot) over the line in terms of loan approval.

          Not it isn't.

          This is a mother putting (slight) pressure on her son, in uni, earning less than the average full time wage, to buy an investment property in a downward spiralling market she admits she knows little about. The son cannot afford it on his own, let alone get "over the line" for loan approval.

          Thus my post below. Professional advice. Don't go guarantor.

          The son can't afford it.

          • Mugsy on 10/09/2019 - 07:37
            +2

            @Typical16-bitEnjoyer: I will have to agree with this. There's a lot of risks to property that people don't consider. Some examples:

            • what if your investment property is used as a meth lab? Costs ~$50k to clean up on average and most landlords insurance don't cover it
            • building defects and you're outside the building warranty period. With all the sloppy workmanship over the past 15yrs, this is a higher risk than ever.
            • body corp special levies. Mine just slugged me $10k. Doesn't sound like OP's son could manage such a payment.
            • vacancy periods. Son will need to incur costs when property not tenanted. His cashflow will be strained.

            As a property professional who has a few properties under my belt and experience with most of the risks i mentioned, I suggest to OP to not put her son in a financially risky position where they don't have the income/savings to manage the risk properly. I give the same advice to my young cousins who are still at uni and not earning much.

  • arkie0 on 09/09/2019 - 14:04

    Wondering if we can have joint ownership without using his First Home Buyers Grant.

    Yes, the FHOG is only applicable to primary place of residence. If it is an investment next time he buys a PPOR he can still use the FHOG.

    As I am new to investment properties, I am also interested to know if if is a good idea to do joint ownership with son.

    Can be a good idea, can be a bad idea. It's good because you can combine your income to get onto the property market. You will both be liable for 100% of debt, if you or your son loses their job the other person has to cover 100%. Same if at a later stage when your son wants to buy a PPOR with his partner, the bank will see the debt on the investment as 100%, but the rental income as 50%, might make serviceability for the PPOR more difficult.

    What if he intents to buy his new house next time with his partner, will he be able to use the First Home Buyers Grant for that.

    Yes, as long as he has never owned a PPOR before and live in it for longer than 6 months.

    Rather then random information on the internet speak to a broker/bank, they will help explain this to you free of charge. You can also call the SRO, explain your situation and they will give you advice.

  • toniyellow on 09/09/2019 - 14:20
    +4

    Congratulations on paying off your mortgage!

    https://www.moneysmart.gov.au/investing/property#pros has a lot of pros and cons to consider about property investment, that aren't about the family relationship.

    On top of those, both you and your son should put a lot of thought into worst-case scenarios and if you are willing to take the risk on this together.

    You would both potentially be tying your financial fate to this one property. What if either of you lost your job? Got ill/injured and can't afford to work ever again? The property gets badly damaged? Your other son gets into significant financial trouble and you want to help? You can take out insurance to an extent against a lot of these risks, but you have to make sure you do that and factor the insurance premiums into the cost. You are both on low incomes - often if people start to experience financial stress the first thing they stop paying is optional things like insurance so it really is something you have to keep in mind.

    His investment horizon is also very different to yours - presumably, you will want to retire at least 20 - 30 years sooner than he will, and may need to sell it to fund that, at a time he may not want to sell but may not be able to afford to buy out your share.

    It might be better to keep your finances separate. Thats not to say you can't help each other out in emergencies, but you are not both forced to sell if something happens to one of you.

  • Downvoter on 09/09/2019 - 14:37
    +6

    This won’t end in tears…

    • arkie0 on 09/09/2019 - 21:21
      -1

      It might end in multiples houses

  • myusername on 09/09/2019 - 14:45

    buy him a brothel

  • Typical16-bitEnjoyer on 09/09/2019 - 14:51
    +3

    You need professional advice.

    Don't sign a guarantee.

    Don't go down this track unless either of you is willing to take on the entire mortgage without help from the other or this may end badly or costly down the track.

  • Baysew on 09/09/2019 - 15:39
    +2

    Has either of you got a deposit?

    • DLDH on 09/09/2019 - 17:41
      -1

      Yes, I have.

  • weezlebub on 09/09/2019 - 15:40
    +1

    rather than both names being on the mortgage, you'd be better off redrawing against your current property to assist him with his deposit (that'll be the hardest part) …

    Con's - legally, it's pretty much a gift and if he gets a house that's at the limit of his means, he wont be able to start paying you back for quite a while
    Pro's - he can get first homebuyers grant and you get to start reclaiming your house

  • JimmyF on 09/09/2019 - 16:20
    -1

    Wondering if we can have joint ownership without using his First Home Buyers Grant.

    Nope, FHBG says your name (or names) of the people wanting the grant can't have owned or had their name on a title before hand.

  • Seedy seed on 09/09/2019 - 16:40
    -1

    Buy it through a family trust, then its not in anyones name.

    • Typical16-bitEnjoyer on 09/09/2019 - 16:46
      +3

      No offence, but textbook example of why financial advice shouldn't be obtained from forums lol.

      • djones145 on 09/09/2019 - 20:54
        +2

        nah br0 create a offshore captive in# bermuda
        funded by a Swiss bank account. create an IPO to get some funding

      • Seedy seed on 09/09/2019 - 22:05

        It was obviously a joke, but cool story bro.

        The only time not to pay for advice about large amounts of cash invested is when you dont have the cash.

  • [Deactivated] on 09/09/2019 - 19:11

    Buy the house and rent it out to him at mate's mum's rate :)

  • TheBilly on 09/09/2019 - 19:20
    +1

    Before thinking about ownership structure you should be figuring out where and what you are going to invest in and how much money you are going to make. Because the whole purpose of investment is to make money. I dont mean, like, johnny down the road said buy an empty block in the burbs because they go up in value as he talks to people. I mean calculate how much money you will make on the real world figures and stats.

  • [Deactivated] on 10/09/2019 - 00:24
    +1

    You only get to use the FHB grant once, and never if anyone that owns the property has ever owned a residential property in Australia at all. Based on the information here I would strongly advise against buying a property for 5+ more years.

    Buying a property isn't necessarily a recipe for success, it can be a money pit which ties you to it for decades, which is a horrible position to be in when you're 20 and may not even want to live in the same city in a few years time.

  • tsunamisurfer on 10/09/2019 - 11:21

    This arrangement can work.

    I have done it myself when my mum helped me get in the property market.

    But you have to know your son/daughter as to whether they are the responsible type.

    I was trusted to have the property in my name only and as a responsible son repaid all outstanding amounts + market rate interest within a few years.

    I think these days adult children may need a boost from parents to get into property.

    • Mugsy on 10/09/2019 - 11:45

      I agree with this but only if it's a PPR that is being purchased and if it's something built over 20yrs ago and has stood the test of time.

      If OP's son is responsible, I'm guessing that they will bring in some decent money after graduation. I wouldn't want to buy a property without a significant income increase in the next 2-3yrs though. Too much risk to take on.

      • tsunamisurfer on 10/09/2019 - 11:52

        Yes there are other aspects like that.

        I was on 40k in the early 2000's, and I got in as the market was going up for the next 10 years.

        Now 40k is not moving the needle for anyone, and the market seems to be dropping.

        But the concept of helping one's child get into the property game is not flawed (risky yes).

  • netjock on 10/09/2019 - 12:30

    I do enjoy a good real estate investment story where parents might just have to put their own assets on the line.

    Let your child work out their own way for a few years. If they can figure it out by 28yo then maybe. At 20 nobody is fit for a 30 year mortgage commitment.

    If you really want to invest put $500 a month into ETF like on the CBA pocket app. At least it is money you can afford to lose.

  • Ozkaye2019 on 10/09/2019 - 12:45
    +1

    Honestly don’t do this unless he is really on board with the idea. This exact situation happened to my best friend. He had bought a house 50-50 with his mum. Then 2 years later he met a girl, then they wanted to buy a house and couldn’t afford to due to the bank not able to give him a mortgage because of needing to take into account his liability on the investment property with the mum. Girlfriend was sad, they couldn’t move forward with their life as a couple so he and his mum sold the investment house (for a small loss). That and the stamp duty the whole thing cost her $40k. Sounds like you’re in a good financial position. Don’t do it.

    • voiletmay on 11/09/2019 - 10:28

      Yes I know of a similar story too, stamp duty was the killer.

      When your son graduates uni, he may have to move interstate or elesewhere in the state (what happened to two of my kids), and might have to pay rent/living expenses. There no way a child not living at home with mum could pay off a mortgage while paying rent/bills/lving expenses.

      I would wait till he is finished uni, has a proper job and then see what you options are.

  • HeWhoKnows on 10/09/2019 - 18:26
    +1

    OP should make a phone to the relevent government office or look up their web site.

    Hard facts are much better than OB opinions

    • Some Guy on 12/09/2019 - 17:12
      -1

      They might be more accurate but they are NOT better.

Login or Join to leave a comment
Login Join