Another newbie looking for direction...

[frugal]

Hi All.

I've been reading the forum off and on for a while now and I'm hoping someone would be kind enough to give me an opinion on structuring now it's time to make a foray into small scale property investment.

We've got the opportunity to buy into a syndicate that owns a commercial property (motel) due to the death of the current majority owner. A new 30 year lease is now in place, and yielding 8% net. The new majority owner will be my father-in-law, so we would be silent partners with no real involvement.

We would be looking at taking a 10% stake funded 100% by increasing the mortgage on our residential property. We would probably look at P&I on this as the cash-flow isn't required, it's more a long-term hold and build equity investment at this stage. I'd look to put the shares in my wife's name as she has the lower tax rate (working part-time).

Does this sound like a reasonable structure? I've read some of the info around LTC's but I'm not seeing any benefit at this stage over doing it as individuals. That said, I don't know what I don't know and it may be there are long term benefits to setting up an LTC now? Would I be best to run this past an accountant?

Thanks for any advice in advance, I need to make a decision soon and I'd like to get started in the right way...

If anyone has any thoughts on a good floating rate to aim for currently, I'm all ears!

Cheers,
Steve

[Hec]

first,
owned by a syndicate ... therefore someone manages the investment .. what are their fees for doing so ?
Therefore is your 8% net truely 8% or is it before fees ?
go from there with advice from your accountant re the structure

Hec

[frugal]

first,
owned by a syndicate ... therefore someone manages the investment .. what are their fees for doing so ?
Therefore is your 8% net truely 8% or is it before fees ?
go from there with advice from your accountant re the structure

Hec

Thanks for the reply, was starting to think I wouldn't get any (I did get one PM also, thanks)

My father in law will manage it and won't charge fees to do so, so the 8% is net after accountants fees to do the GST etc. Lessee covers all outgoings and general maintenance, and being under 10 years old I wouldn't expect too many unexpected costs.

Looks like I'll need to find an accountant to discuss this with. Any recommendations in ChCh or is GRA the way to go?

[Glizzle]

Waiting for someone to jump in with Motel = P lab

[Maccachic]

Has a Technical due diligence report been carried out on the complex?

http://www.prendos.co.nz/technical-due-diligence

[frugal]

Waiting for someone to jump in with Motel = P lab

I'd be looking for a much higher return if that was the case

[frugal]

Has a Technical due diligence report been carried out on the complex?

This was a concern for me, after the last couple of years here in ChCh. The motel itself is not here and we have received some assurances around this. At this stage our exposure would be minimal if an issue did come up. We've been advised the building is new enough not to be in the scope of the local authority 'earthquake prone' building review.

[Maccachic]

http://www.stuff.co.nz/business/indu...-strengthening

Ministry’s recommendations

• All non-residential and multi unit or storey residential buildings will have to have a seismic capacity assessment within five years of the changes taking effect, and be strengthened or demolished within 10 years after the assessment.
• Assessments would be faster for certain buildings on transport routes or which are identified as crucial in an emergency and some buildings, such as low-use rural churches or farm buildings would be given longer.
• Information on whether the building is below or above the earthquake-prone building threshold will be made available on a public register
• The current national earthquake prone threshold of 33 per cent will not be changed.

[frugal]

Thanks for the link. Even if this goes through with all these recommendations, it should exceed the required standard anyway.

[speights boy]

The new majority owner will be my father-in-law....

I'd look to put the shares in my wife's name .....

My father in law will manage it .....

....funded 100% by increasing the mortgage on our residential property

.....so we would be silent partners with no real involvement.

After reading the sensible replies I am almost embarrassed at being such an old cynic.

Let's just hope things don't go pear shaped on the home front frugal; otherwise you may be more of a silent partner than you had expected.

[frugal]

After reading the sensible replies I am almost embarrassed at being such an old cynic.

Let's just hope things don't go pear shaped on the home front frugal; otherwise you may be more of a silent partner than you had expected.

lol - where's the trust


Funny thing is that my better half is likely to be left the share from her parents in a trust or similar arrangement to keep those who have married into the family from taking what is not ours... there's a lot more at stake than our initial investment if things go bad at home! Best I be good