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Potential JV deal

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  • Potential JV deal

    We currently rent a 2 bed, 85m2 townhouse in St Helliers for $550pw. The landlady is a friend who recently retired and relocated out of Auckland. The 3 storey unit sits in a row of 6 owner occupied townhouses. Overall the condition is good but it would certainly benefit from a paint and new carpet. Estimated market value is $1milion and her mortgage is very, very minimal according to her.

    The landlady wants to free up $500k in equity. She has offered us half the house at $500k. Her reasoning is we can buy into the capital growth of a premier Auckland suburb. We don't disagree on the suburb potential but she expects us to get a mortgage for $500k PLUS continue to pay half our rent.

    We have a 2 year old baby and a combined income of $180k pa. We also have a $500k cash deposit from the sale of 2 houses owned individually before we met. Our current goal is to secure a 3 bed Auckland home for around $1mil and try for a second baby. We're not spring chickens so time is of the essence!

    Staying in the St Helliers townhouse with 2 kids is not a relaxing option.......but.......we think theres some motivation in her request.

    One option that sprang to mind, once we've found a 3 bed home for ourselves, is to accept her offer using our equity on the following terms: We jointly pay to re-paint and carpet in order to boost the rent. $650pw in this area is not unreasonable for a property like this. We then negotiate a favourable percentage of that rent that covers our $500k mortgage, rates, bodycorp and insurance for say 3 years. Any rent left over is hers. I'm assuming Brightline will play in to this so 5 years is the ideal hold (Labour Govt changes pending!!). That way she gets her $500k equity release and we have half ownership of a cash flow neutral St Helliers townhouse. Numbers below.

    Thoughts please?

    Rates $2,200pa
    BodyCorp $6,900pa
    Insurance $800pa

  • #2
    Hi Lifeworkbalance - welcome to PropertyTalk

    There's more to it when you buy a property with someone. Get legal advice - you need to know what happens when one of the owners wants to sell or they die - i.e who gets what.

    Of course, it can be done and I have friends who have bought a property together. However, it needs to be 'equal' - i.e. you get 50% share and your friend seems to still have the upper-hand so it appears - i.e. she is calling the shots. If you want a rental property after you've got your own house - go get one where you have 100% ownership and control.

    This is just my 2 cents worth.



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