Buying advice - complicated proposal

danreeve · Jul 26, 2022 10:32 am

Good morning all,

Thank you for your wisdom in so many other posts, I'm hoping you can help me with our journey.

To set the scene, we live in a house in Sydney that is owned by my wife's grandmother, who now lives in aged care. We have been renting off the family/her for nearly 3 years and are debating whether we would like to/can afford to buy it. The Grandmother's 2 children, my wife's mother and uncle have no interest in keeping the house and if we weren't renting it, its likely they would have sold it by now as I don't think there is the interest to rent to the general public. There is support for us to buy it if we want to.

Its a 50's single story house in a beautiful location in the Sutherland shire with a pool and views of the Royal National Park, so it has a lot going for it, but it is probably the last house on the street that hasn't been totally renovated. My guess is that the value is approx $2.2m to $2.6m, its hard to tell as there isn't many similar properties that have sold recently, but that's my uneducated guess.

Our borrowing power is probably in the $1.5m range, and we have savings and equity in another property of maybe $500k, so essentially we cant buy the whole thing.

To the main question.

Is there a situation, where we can go in with my wife's parents to buy the property. I am thinking our 50% will be mortgaged (essentially buying out the uncle's future share), but the parents 50% would be based on future equity in the property (like a loan from the grandmothers estate). The Grandmother's estate, does not need the income of the property to pay for her aged care, and my wife's parents have a comfortable retirement without the sale income so we are fortunate in that respect.

If so, who do I need to speak to about this? Tax accountant (for the most effective way to buy), financial advisor, lendor, conveyancer.. all of the above??
There is a lot to unpack, so just trying to figure it all out as to whether its possible, and costs involved etc. Thankfully there is no time pressure.

Tell me I'm crazy if this won't work.

Thanks,
Dan

SJT76 · Jul 26, 2022 10:40 am

danreeve

Good morning all,

Thank you for your wisdom in so many other posts, I'm hoping you can help me with our journey.

To set the scene, we live in a house in Sydney that is owned by my wife's grandmother, who now lives in aged care. We have been renting off the family/her for nearly 3 years and are debating whether we would like to/can afford to buy it. The Grandmother's 2 children, my wife's mother and uncle have no interest in keeping the house and if we weren't renting it, its likely they would have sold it by now as I don't think there is the interest to rent to the general public. There is support for us to buy it if we want to.

Its a 50's single story house in a beautiful location in the Sutherland shire with a pool and views of the Royal National Park, so it has a lot going for it, but it is probably the last house on the street that hasn't been totally renovated. My guess is that the value is approx $2.2m to $2.6m, its hard to tell as there isn't many similar properties that have sold recently, but that's my uneducated guess.

Our borrowing power is probably in the $1.5m range, and we have savings and equity in another property of maybe $500k, so essentially we cant buy the whole thing.

To the main question.

Is there a situation, where we can go in with my wife's parents to buy the property. I am thinking our 50% will be mortgaged (essentially buying out the uncle's future share), but the parents 50% would be based on future equity in the property (like a loan from the grandmothers estate). The Grandmother's estate, does not need the income of the property to pay for her aged care, and my wife's parents have a comfortable retirement without the sale income so we are fortunate in that respect.

If so, who do I need to speak to about this? Tax accountant (for the most effective way to buy), financial advisor, lendor, conveyancer.. all of the above??
There is a lot to unpack, so just trying to figure it all out as to whether its possible, and costs involved etc. Thankfully there is no time pressure.

Tell me I'm crazy if this won't work.

Thanks,
Dan

I would start with either a tax accountant or a local solicitor's office that does both conveyancing and probate.

oklouise · Jul 26, 2022 3:00 pm

danreeve

Good morning all,

Thank you for your wisdom in so many other posts, I'm hoping you can help me with our journey.

To set the scene, we live in a house in Sydney that is owned by my wife's grandmother, who now lives in aged care. We have been renting off the family/her for nearly 3 years and are debating whether we would like to/can afford to buy it. The Grandmother's 2 children, my wife's mother and uncle have no interest in keeping the house and if we weren't renting it, its likely they would have sold it by now as I don't think there is the interest to rent to the general public. There is support for us to buy it if we want to.

Its a 50's single story house in a beautiful location in the Sutherland shire with a pool and views of the Royal National Park, so it has a lot going for it, but it is probably the last house on the street that hasn't been totally renovated. My guess is that the value is approx $2.2m to $2.6m, its hard to tell as there isn't many similar properties that have sold recently, but that's my uneducated guess.

Our borrowing power is probably in the $1.5m range, and we have savings and equity in another property of maybe $500k, so essentially we cant buy the whole thing.

To the main question.

Is there a situation, where we can go in with my wife's parents to buy the property. I am thinking our 50% will be mortgaged (essentially buying out the uncle's future share), but the parents 50% would be based on future equity in the property (like a loan from the grandmothers estate). The Grandmother's estate, does not need the income of the property to pay for her aged care, and my wife's parents have a comfortable retirement without the sale income so we are fortunate in that respect.

If so, who do I need to speak to about this? Tax accountant (for the most effective way to buy), financial advisor, lendor, conveyancer.. all of the above??
There is a lot to unpack, so just trying to figure it all out as to whether its possible, and costs involved etc. Thankfully there is no time pressure.

Tell me I'm crazy if this won't work.

Thanks,
Dan

i have three concerns about this proposal...first even if you could raise the money to buy the property will you then need to find more money to make necessary improvements and be trapped by owning a property that is too expensive to finance allow enough income for you to live comfortably and cope with any changes in interest rates or family crisis, second is the value of the house (and/or rent being received) already included in any Centrelink allowances received by any members of the family with an equity in the property as transferring a property at less than full market value can be treated as a gift and have impact on the Centrelink payment and three the gifting issue may also have an impact on taxes....so, as already advised, you should consult an accountant and ask Grandmas's carers to check with the Financial Advisers at Centrelink but i'm wondering if you have to pay market value for the house what is the advantage of buying this specific house and would you be better off with a less expensive house and, if the other members of the family received their share of a sale price they may be willing to give/loan you some of that money to finance an alternative house that doesn't have all the extra challenges...lots to think about and research...hope you report back with your decision as it's a similar common question for seniors when moving out of the family home

danreeve · Jul 26, 2022 5:24 pm

Hi oklouise,

Thanks for your reply, to answer your questions:

1 - Lets say the purchase price is $2.5m, then we can comfortably mortgage 50% of that at approx $1.25m. We also have savings and equity of approx $500k. The house does need modernisation, so a portion of the $500k would go towards that (including the sale of our other property if we need to).

2 - As far as Centrelink is concerned for the aged pension (if that is your concern), currently the Grandmother exceeds the asset test threshold (regardless of the house sale), so that is not a concern. Both the mother and the uncle likely exceed the threshold at present also, prior to any future inheritance.

3 - Understand there is many tax issues at stake here, including potentially lad tax for my wife's parents as this is a second property (the more i walk through this whole thing, it seems way too complicated on tax alone!).

This is just a fact finding mission at the moment, the house is the family home so my wife has that attachment to it (4 generations have now lived in the house), on top of that and despite the house needing modernisation the location really is good, and its a once in a lifetime opportunity to own a place in a location like this (for us). I also think we can add value to it through renovations. We can purchase elsewhere locally, and could purchase a duplex for example, and mortgage on our own, so we have other options. But interesting to search around and see if there is any way of keeping in this place.

Thanks,
Dan

Pulse · Jul 26, 2022 11:04 pm

tricky situation, You could have a seperate loan from your wife’s grandmother drawn up. ie borrow $1.25m from her and $1.25m from the bank, to pay her $2.5m. You just need to pay it back somehow and make sure everyone’s interests are protected in case of crisis ie death of any party or your divorce. I know it seems unlikely, but renovating together is very stressful

oklouise · Jul 27, 2022 8:27 am

danreeve

Hi oklouise,

Thanks for your reply, to answer your questions:

1 - Lets say the purchase price is $2.5m, then we can comfortably mortgage 50% of that at approx $1.25m. We also have savings and equity of approx $500k. The house does need modernisation, so a portion of the $500k would go towards that (including the sale of our other property if we need to).

2 - As far as Centrelink is concerned for the aged pension (if that is your concern), currently the Grandmother exceeds the asset test threshold (regardless of the house sale), so that is not a concern. Both the mother and the uncle likely exceed the threshold at present also, prior to any future inheritance.

3 - Understand there is many tax issues at stake here, including potentially lad tax for my wife's parents as this is a second property (the more i walk through this whole thing, it seems way too complicated on tax alone!).

This is just a fact finding mission at the moment, the house is the family home so my wife has that attachment to it (4 generations have now lived in the house), on top of that and despite the house needing modernisation the location really is good, and its a once in a lifetime opportunity to own a place in a location like this (for us). I also think we can add value to it through renovations. We can purchase elsewhere locally, and could purchase a duplex for example, and mortgage on our own, so we have other options. But interesting to search around and see if there is any way of keeping in this place.

Thanks,
Dan

if the Centrelink issue is not a problem, there are no other family members who would be financially disadvantaged, you clarify and can manage tax issues and have any agreement drawn up legally then the worse that could happen is you would have to sell which is no worse than any other purchase...but, how do potential mortgage payments compare to current rent and being very specific does your wife have any expectations from Grandmas, mum's and uncles future estates that give a future windfall to cover the outstanding debt?...lots to consider but with careful research sounds like an opportunity worth pursuing, best of luck