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Our funds sitting in the bank as FD ......Need Help

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  • Our funds sitting in the bank as FD ......Need Help

    One of our friends ( professional medic) requested help to fund their purchase of a commercial unit.
    The bank approved 300K but later put a condition that the unit should be owner occupied only and can not rent. Friend is bound to stay at present unit for another 2 yrs .
    They asked us if we can have involved , a bit of background of us , we are mom dad investors prematurely retired and live on cash flow from our long hold rentals .
    We re willing to help having funds sitting in the bank as fix deposit.
    They are wanting to formulate document with solicitor and happy to pay commercial interest rate. Floating rate 5.30%
    6 mths fixed 5.15%
    1yr fixed rate 5.65%
    2yrs fixed rate 6.20%
    3yrs fixed rate 6.85% but expect to pay off within 2 to 3 yrs gradually reducing the loan.
    Then They can buy the unit and rent until they are ready to move in when their lease to review in 2 yrs while they pay the com rate of interest for the money we lend
    Any pros & cons in tis process & suggestions on these lines , dos don'ts and any advice in formulating the document is appreciated ????

  • #2
    Originally posted by Anita View Post
    One of our friends ...
    I'm a bit worried that you are being taken advantage of.

    Having capital to lend into this housing market is probably worth a lot more than 5 or so %.

    Probably more like 20%.

    Of course there are many ways to look at it.

    Depending on your relationship with your friends and how you view risk.

    Personally, I would go shares in that venture with them.
    Say the unit is worth 1 million.
    They have 500k and you have 500k

    If you both co owned the building, you would get capital gain on the property, and half shares on any rent - and costs too of course.

    But the biggest piece of wisdom around this subject is...
    Never lend money to friends.

    Disclaimer, I've done exactly this on many occasions, and it always worked out well.


    • #3
      A owner-occupied commercial unit? Seems an odd demand. Is it a shop?


      • #4
        Yes it is a commercial /a unit to be used as her GP clinic by the Joint owner