Header Ad Module

Collapse

Announcement

Collapse
No announcement yet.

bringing a partner into an Investment property

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • bringing a partner into an Investment property

    HI There,

    Has anyone ever brought a partner into an Investment property, We currently own one property and are bringing my wife's parents into the deal as we need to release some equity for a business opportunity.

    If anyone has done this was it very complicated? They will need to be named on the title etc etc.

  • #2
    First and always in this situation.

    Independent lawyers for each side.

    Property sharing agreement is a must.

    Everything in writing.

    Maybe also discuss with the Wife's siblings.

    www.3888444.co.nz
    Facebook Page

    Comment


    • #3
      Hi Tulson28,

      If the rental is owned by an LTC or company it can be relatively straightforward. Still need expert advice as can be some catches, but relatively simple to work thorugh value, then sell X shares to wife's parents.

      If owned personally or in a Trust, likely to be harder. As then effectively have to sell to new entity. Could be brightline tax, could be deprecation recovery, could be tainted sale etc. Plus cost you more in legal fees to buy and sell. Other options could be a loan instead, but that still needs to be documented correctly.

      Ross
      Book a free chat here
      Ross Barnett - Property Accountant

      Comment


      • #4
        Originally posted by Rosco View Post
        Hi Tulson28,

        If the rental is owned by an LTC or company it can be relatively straightforward. Still need expert advice as can be some catches, but relatively simple to work thorugh value, then sell X shares to wife's parents.

        If owned personally or in a Trust, likely to be harder. As then effectively have to sell to new entity. Could be brightline tax, could be deprecation recovery, could be tainted sale etc. Plus cost you more in legal fees to buy and sell. Other options could be a loan instead, but that still needs to be documented correctly.

        Ross
        Just as a quick note, it being in an LTC won't avoid brightline or depreciation recovery issues, due to deemed disposal rules. Am sure Ross meant this to be included, but the way I read it looked like the brightline and depreciation issues related to personally/trust, not LTCs so pays to clarify.
        AAT Accounting Services - Property Specialist - [email protected]
        Fixed price fees and quick knowledgeable service for property investors & traders!

        Comment


        • #5
          Hi There,

          Have never claimed depreciation on it and am also selling the half only slightly above purchase price to cover the cost of a fence and gate that was built so surely no capital gains tax there?

          Comment


          • #6
            Originally posted by tulson28 View Post
            Hi There,

            Have never claimed depreciation on it and am also selling the half only slightly above purchase price to cover the cost of a fence and gate that was built so surely no capital gains tax there?
            Hi,

            If you are selling to related party, generally have to sell at fair market rate. So still have to be careful of taxing provisions.

            What entity holds it?

            As above, if in an LTC, can be a lot easier
            - brightline test. Selling shares can still be caught, but is generally also relatively easy to legally avoid

            Ross
            Book a free chat here
            Ross Barnett - Property Accountant

            Comment


            • #7
              Originally posted by Anthonyacat View Post
              Just as a quick note, it being in an LTC won't avoid brightline or depreciation recovery issues, due to deemed disposal rules. Am sure Ross meant this to be included, but the way I read it looked like the brightline and depreciation issues related to personally/trust, not LTCs so pays to clarify.
              I didn't mean anything extra to be included. With an LTC, often there is no depreciation recovery at share transfer, and also there is different rules for the brightline, so often this is no issue either. So what I put was correct, that depreciation recovery and brightline are likely to be just issues for personal ownership/trust. I did put get expert advice as there can be catches and therefore the restructure would need to be done correctly to avoid issues.

              Ross
              Book a free chat here
              Ross Barnett - Property Accountant

              Comment


              • #8
                Make sure your goals and their goals align.

                What is the agreement going to look like in 5 years time?

                Figure out an exit strategy plan that you both agree to as a starting out point (simple get valuation, half costs, either party can buy the other out etc)

                What is expected from each person? Are they 100% hands off? Who is managing the property, arranging repairs, doing repairs etc?

                Depending on how they are injecting money , you may want to split the mortgage so that they have one relevant to their share.

                Tax advantages/disadvantages

                Get a good feeling of the above and then get a lawyer to write something up, then parents present to their lawyer. Make sure they are different.

                Comment

                Working...
                X