Have you every wondered how you can help your children become involved in property ownership. Without putting up the cash or pushing them into a huge mortgage. The answer is simple and here so read on.
You will need a mortgage broker to assist you with the calculations and formulas and the selection of an appropriate mortgage.
Here it is! The key is in your own mortgage. What is the process?
There are two senarios.
1)One you have a small mortgage and you can comfortable increase the mortgage to cover the cost of the depoisit for the purchase of the rentals.
2) You cannot increase the mortgage in which case you split your mortgage into two one split being the size of the deposit to purchase a rental.
In this case we will assume no 1 senario. The only difference in senario two is that there is an extra 12 to 18 months before the first rental is purchased.
Step one:
Do some calculations, you will need to find out
1) A rental property purchase price
2) Expenses in buying property
3) Rental target
4) Property must be positively geared
5) 20% of the rental is surplus after interest and expenses
6) The deposit required to purchase the property and achieve above
Step two:
Increase you mortgage by the amount of the the deposit
Step three:
Split your own mortgage into two parts
1) Your original mortgage P I
2) Your deposit split P and I, Interest only for 5 years mortgae
3) The deposit split is equal to the deposit plus 5%
Step four:
Buy an investment property.
1) Children can live there, but MUST pay commercial rent.
2) Its better that the kids dont live there, you will weaken and they wont pay rent!!!!!!
3) It makes the project more real, not an extension of living with parents
4) Your new investment apartment has its own bank transaction account. (Not an offset)
5) Make the mortgage P I with interest only payments for 5 years.
6)Children on the title
Step five:
The rental is disposed of in the following way
1) Paid into the investment apartment bank transaction account
2) The investment apartment mortgage interest only is paid
3) 20% is paid into the deposit split mortgage.
4) Balance to pay expenses.
Step six:
The children pay $1000 a month into the original split mortgage. Parents can pay the minimum payment or add additional payment depending on circumstances
Be careful not to swamp the kids and take away feeling of achievement.Get them used to making a commitment and discipline of consistent payments
Step seven:
When the split mortgage is paid to zero either
1) Parents close the account
2) The split is redrawn 100%
3) The redraw is the deposit of the next investment
Step eight:
Go to step four.
As they say a family that invests together stays together.
When do the children buy their own home? When they become smart enough to have figured out what you have done for them and make a commitment to do it for themselves.
Dont despair; they do end up learning how to do it!
About the author of this article:
john e edwards explains how a mortgage is a wealth creation tool, and how to use the mortgage effectively to start creating wealth in your life now. contact a specialist to get you on the right path now.
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