澳洲Australia property Rent property to family/relatives | Sydne


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Hi,

I am planning to rent out my unit to one of my relatives (without a Property manager) and wanting to find out if someone out there has done this before.

The goal is to claim the negative gearing benefit while renting to someone you can trust.
These questions stuck in my head and hope someone can clarify them.

1. Can the rental price be set at an agreed price or it has to be market value?
2. Should a bond be lodged?
3. What documents are required by the end of financial year to support negative gearing benefit/claim?



Regards,


HL  

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We rented an Investmnet Properyty (unit) to my younger sister whilst she was going through university (and working part time), have added some brief replies below

sydboyz said: ↑
Hi,

I am planning to rent out my unit to one of my relatives (without a Property manager) and wanting to find out if someone out there has done this before.

The goal is to claim the negative gearing benefit while renting to someone you can trust.
These questions stuck in my head and hope someone can clarify them.

1. Can the rental price be set at an agreed price or it has to be market value?

Yep, I wouldn't be charging $100 p/wk if comparable properties are $400 p/wk though. If your renting to someone you trust, then trust them to pay a fair and reasonable rent for your asset, otherwise you are supporting their lifestyle.

Too less a rent and some may assume there is more going on within the deal (they may even be correct) you may not be able to claim all interest and expenses as deductions if you are charging below market rent

Get a couple of market appraisals from your local PM's

If this is your PPoR you may want to get a valuation also for future CGT reasons



2. Should a bond be lodged?

Yep, also a lease signed and ensure untilities etc go into their name



3. What documents are required by the end of financial year to support negative gearing benefit/claim?

? Bank Interest Statements, Depreciation Schedule, Maintenance Invoices, etc..the normal :confused:

Regards,


HLClick to expand...
 

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ATO Example

Google is your friend

EXAMPLE: Renting to a family member

Mr and Mrs Hitchman were charging their previous Queensland tenants the normal commercial rate of rent

– $180 per week. They allowed their son, Tim, to live in the property at a nominal rent of $40 per week. Tim lived in the property for four weeks. When he moved out, the Hitchmans advertised for tenants.

Although Tim was paying rent to the Hitchmans, the arrangement was not based on normal commercial rates. As a result, the Hitchmans cannot claim a deduction for the total rental property expenses for the period Tim was living in the property. Generally, a deduction can be claimed for rental property expenses up to the amount of rental income received from this type of non-commercial arrangement.

Assuming that during the four weeks of Tim’s residence the Hitchmans incurred rental expenses of more than $160, these deductions would be limited to $160 in total – that is, $40 ✕ 4 weeks. If Tim had been living in the house rent free, the Hitchmans would not have been able to claim any deductions for the time he was living in the property. (Example from ATO)Click to expand...
 

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You may think that renting to a family member will be of great benefit to you and easy. No hassle investment property.
It wont be in the long run.
My free advise

DONT  

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Hi
We're doing it now, have been for a while.
Successfully to.
For it to work, it needs to be a business type deal, as in the same as a normal agreement with someone you don't know.
Make a formal meeting where agreements are made and documents are signed etc.
The documents can be down loaded easily, use the ones for the state the property is in.

As for renting at a reduced rate, we’re doing this to, reason is, they don’t have access to the whole property.
This can be easily explained to the ATO if need be, it is written in the rental agreement. If you chose to do this, make sure you are covered in a similar way. Our accountant wanted to see this.

All the best with it.  

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allmine said: ↑
As for renting at a reduced rate, we’re doing this to, reason is, they don’t have access to the whole property.
This can be easily explained to the ATO if need be, it is written in the rental agreement. If you chose to do this, make sure you are covered in a similar way. Our accountant wanted to see this.Click to expand...
If they're paying 75% rent for access to 75% of the property, and the remaining 25% is retained for your use (storage or your own stuff or something?), then I assume you can only claim 75% of costs incurred, right?  

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Hi ozperp
I am not able to answer that accuratly, I see your point and how it makes perfect sense.
I'll have to ask my Accountant when i next visit with them on this, however I do think we are claiming the whole of any expense incured.  

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IMO you should be doing everything as though you weren't renting to someone you knew. Use a property manager, lodge a bond, pay market rent. As has been suggested, get a valuation, because you WILL have to pay capital gains tax if you ever sell the property, and make a profit on it, because part of the property has been income producing.

My personal opinion is that I would NEVER rent any of my properties to someone I know. Horses for courses.  

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sydboyz said: ↑
Hi,

I am planning to rent out my unit to one of my relatives (without a Property manager) and wanting to find out if someone out there has done this before.

The goal is to claim the negative gearing benefit while renting to someone you can trust.Click to expand...
I think you are increasing your risk by renting to a family member/friend, especially if it is your first IP. From experience, I can tell you that many people (including the rellies) feel that a landlord is rich. If related to you, you may well find many "reasons" why rent will be paid late, or not at all. You are rich, after all and should have some compassion for those less fortunate than you.

With a first IP, are you going to educate yourself with all the rules & regulations with managing such a property. What will you do if rent is delayed for more than 14 days? Will you have the balls to send termination notices or to send them to tribunal? If they damage your property (whether intentional or accidental) what will you do? If rents are rising strongly, will you be able to give them a rent rise and keep it up to date? What will your response be when they say they can't afford the raise? How will any of these questions affect your relationship with them?

Of course, none of us expect that those people we know and love would do this, but the fact of the matter is that some do. My suggestion is that if you would feel more comfortable by renting to a family member then do it as an arms length transaction. Use a PM. They will give you a degree of removal from it being a personal transaction. Instruct your tenant that everything to do with the property is to be done through the PM. Also tell them that you have no control over the rent, meaning that the PM sets the rent, not you (they will believe this) AND that the PM will do everything by the book. If they are late with rent, then they will have the PM breathing down their neck.

If they come back and say that you can trust them to do the right thing and that you can save money by not using a PM, then, if you feel the need to justify it to them, you can easily say that since it is your first, you are unsure what your legal responsibilites are AND that you are way too busy to do it yourself.  

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I'm somewhat with skater; mixing investments and family is perilous.

Check out what happened to this family featured on Selling Houses Australia. They rented to the wife's BEST FRIEND and her 7 kids and they trashed the place, destroying the friendship and almost bankrupting the family.

On the other hand, I don't think it's hard and fast, I think it's possible for it to work and there are plenty of examples where it has worked. Only you can be the judge of how strong your relationship with this person is, and whether they are truly trustworthy.

Make sure you're aware of both parties' rights and responsibilities, and talk with them in advance about how you plan to handle certain situations. eg What if you get in a financial situation where you have to sell, or want to sell because you get offered a great price? Will they be OK with moving, or p***ed off with you? What if they want to move elsewhere soon after you buy - are you OK with renting the same property to a stranger on the open market, or will you be annoyed with them? How are you going to decide upon rental increases? If they stay a long time, you'll have to increase the rent at least to some degree, and based on history, it'll probably be more than CPI and is another potential cause of friction if rents in the area explode.

Basically go through all the "what ifs" that you can imagine, and make sure you're confident that your relationship can withstand these situations.

Good luck, and let us know how it goes.  

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