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  1. #11

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    Hi Ross,

    Thanks much for pointing out the risk involved. I have been thinking about it as well. How risky does it get? But then again, I think my risk will be minimised if I find a win-win situation for this case.

    The IP we have is positive cashflow (though minimal, still positive). It's our mission to buy IP with positive cashflow. Had it fixed on 3 years interest, P + I. Hopefully, by the three years, rent would have caught up(currently, the rent tenants are paying are below the market value). It's more of a business partnering decision. Good tenants, why suddenly increase their rents.

    Should we buy another IP to add to portfolio, we'd wait for a positive cashflow one still. We don't believe much on negative gearing.

  2. #12

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    Hi Welly Broker,

    Hubby and I thought of just lending them the additional fund they need but because I'm out of work, top-ups are a bigg ??? right now from lenders, is it?

    Will get in touch with you. =)

  3. #13
    Join Date
    Oct 2008
    Location
    Auckland/Melbourne/ whereever the money is
    Posts
    1,321

    Default

    In addition to the big fat NO, DON'T DO IT that has already been expressed above, there is another side to guarantees that was news to me when I heard it some months ago.
    I was discussing options with the ASB for me helping my daughter to buy her first home using my properties as security. The guarantee option quickly became a no goer when the ASB pointed out that they cross guarantee, ie at the same time I am guaranteeing my daughters purchase, she becomes liable for all my liabilities as well !!!!!
    This is an absurd situation, if she cant quite manage to finance a place on her own, there can be no way she could cover a default on any of my loans as well.
    Maybe it is designed like this so that the banks dont have to take the risk with guarantees, but I am sure it is restricting a lot of fist home buyers.

    I am keen to hear of other viable alternatives that can make use of equity, without having to raise extra loans that impact on cashflow.

  4. #14
    Join Date
    May 2008
    Posts
    2,911

    Default

    Quote Originally Posted by Keithw View Post
    I was discussing options with the ASB for me helping my daughter to buy her first home using my properties as security. The guarantee option quickly became a no goer when the ASB pointed out that they cross guarantee, ie at the same time I am guaranteeing my daughters purchase, she becomes liable for all my liabilities as well !!!!!
    I don't see the problem with this. It wasn't something I'd expect but I can't think of any problems with it.
    Do you have a few high risk liabilities?

  5. #15

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    I'm not sure if the banks will still do it but last year we put a deal together to help a child into a home by buying the house well under valuation and selling to to her at valuation. We left the difference in which covered her deposit and she borrowed the balance. Eliminates any guarantees. You could of course do this for a child even if you didn't have a margin. You are only exposed for whatever you have left in the property to make the deal viable for the bank.

  6. #16
    Join Date
    Oct 2008
    Location
    Auckland/Melbourne/ whereever the money is
    Posts
    1,321

    Default

    Quote Originally Posted by Bob Kane View Post
    I don't see the problem with this. It wasn't something I'd expect but I can't think of any problems with it.
    Do you have a few high risk liabilities?
    No Bob, its not about whether they are high risk or not, its about the volume of lending.
    If she cant afford to finance a 500k loan on her own for her property without a guarantee, how could she ever be assessed as being able to cross guarantee multi million loans, regardless of risk ???

  7. #17
    Join Date
    Oct 2008
    Location
    Auckland/Melbourne/ whereever the money is
    Posts
    1,321

    Default

    How did you get on with Cap Gains tax / Bright line test etc.
    Was it sold to her by delayed settlement or something, at a date 2 years after you bought ?
    Was your status as a trader any hinderence/ advantage in the process.

    I'm not sure if the banks will still do it but last year we put a deal together to help a child into a home by buying the house well under valuation and selling to to her at valuation. We left the difference in which covered her deposit and she borrowed the balance. Eliminates any guarantees. You could of course do this for a child even if you didn't have a margin. You are only exposed for whatever you have left in the property to make the deal viable for the bank.

  8. #18

    Default

    How did you get on with Cap Gains tax / Bright line test etc.
    Was it sold to her by delayed settlement or something, at a date 2 years after you bought ?
    Was your status as a trader any hinderence/ advantage in the process.
    Any thing like this we treat as a trade, so just pay income tax. So point 2 not relevant. I think it's an advantage in that all the other issues become irrelevant.
    We will potentially have an accounting issue when we write off the debt later but that's all part of helping family.....
    Last edited by Bobsyouruncle; 15-08-2017 at 05:08 PM.

  9. #19

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    You'd have to check with a broker if the banks will still accept it. The banks won't allow a second mortgage currently behind them so you can't do this as a business strategy currently but for family it worked fine.

  10. #20
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    12,933

    Default

    Quote Originally Posted by Bobsyouruncle View Post
    The banks won't allow a second mortgage currently behind them so you can't do this as a business strategy currently but for family it worked fine.
    Are you saying banks will accept a second mortgage if the money is coming from a family member?
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