Tenants in Common

Hi, Just wondering if there are any issues with me going Tenants in Common with my husband our our next IP?  I would like to have 90% ownership for 2 reasons.  First because I picked the property and second because I am the lower wage earner.  The property is well and truly positive cash flow with 12% yield.   Where would this arrangement be listed?  Does it need to be listed in the contract or mortgage docs?  Thanks.  

Is there any reason why you wouldn't purchase it in a discretionary trust?

I think the trust will be the way to go for furture purchases but I beleive it takes a while to set up and the cost is a few thousand.  We are actually buying at the moment so don't have the time for the trust..yet.  Would you recommend a trust for us?  We are husband and wife and we want to put together a mulitple property portfolio.  Thanks.

Yes it needs to be shown on the Transfer document however as Luke mentioned I would certainly looking to buy the property in Trust if it is positively geared for a number of reasons.

In regards to set up it takes 24 hours to set up a Discretionary Family Trust and would cost circa $850 with you as personal Trustees or another circa $600 as a Corporate Trustee.

There are so many advantedges it is not funny so the fact of waiting a day would for most be neither here nor there.

You will save the costs many times over.

The most important part is however the lending structure especially if you want start to acquire multiple properties.

At that yield i am assuming the property is regionally based to lvr will vary depending on a few factors.

You certainly dont want to be cross collateralising your loans as otherise you will not buying when you want to or when you feel you can afford the next IP but merely when your lender allows you to. If they down value one of your properties, have a change in Credit policy (which at the moment can be weekly with most lenders) or change in serviceability criteria (again which happens all the time and often with every rate reduction) you will be stopped in your tracks and the cost and time of unravelling the securities (if it can be done) will cost you a lot more in the long run.

Yes we all want to jump on the next IP especially one with a good yield but trust me taking time to ensure the loan structure and entity is correct will be well worth it when you buy your 10th or 20th IP.

Cheers

Yours in Finance 

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Want to live of your rental income? 0-40 properties in a decade. Email me for a copy of my API Magazine interview

If property is in WA the ownership ratio will need to be included on the contract offer and acceptance.

Derek
North Perth Project coming up - est +$92K profit & rent returns ~9%+ - http://tinyurl.com/7untpjy
derek@eosproperty.com.au | www.eosproperty.com.au | 1300 558 114

Hi Richard, we have not cross collatoralised and have 4 properties at present.  I am surprised that it can be done so quickly.  Friends of mine were told it would take too long and to not bother when they were in the process of buying a property.  I guess we have been waiting to find out more before jumping in.  We don't plan to sell properties often and we have mostly new properties at present and I think there is some issue with not being able to claim depreciation when something is in a trust?  I have also got concerns about some tax issues with setting up a trust.  I have heard you can be caught out if you set one up with the main aim of saving tax - you can be caught on this supposedly.  Al of these things concern me so I have been waiting to get further opinion before jumping in.  In the meanwhile just need to find out more about the 90:10 tenants in common and if there any tax issues with this set up and where we need it listed on the paperwork.  The property is in QLD Derek.

Would love to hear more about using tenants in common and also trust set ups from other people.  What are you all using when you build up your multiple property portfolios? 

You have some misconceptions regarding trusts.

Trusts can claim depreciation and there are no tax issues - but this shouldn't be your major concern. They can be set up very quickly. There are no stamping issues with trusts in QLD (costs $500 stamp duty in NSW).

With Tenants in Common you also need to remember what happens at death. (I am not talking about heaven either!). Make sure you have  a proper will in place and one that takes into account any loans secured by the properties.

Regards

Terryw

As Terry has mentioned i think you should avoid taking advice from friends like that you seem to have mislead you totally.

I have 5 Family Trusts that own our property portolio of some 40 residential properties and would never buy in our personal names whether it be as Joint Tenants or as Tenants in Common.

In Qld you notate the Transfer Form 1 showing how you wish to hold the property.

Cheers

Yours in Finance

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Want to live of your rental income? 0-40 properties in a decade. Email me for a copy of my API Magazine interview

OK, sounds like a trust is the go.  What trusts are people using and what are the advantages or best application of your trust?  Thanks for your advise everyone, I am learning lots. Is a trust always set up by an accountant?  My accountant is quite young and has set up trusts but not many.  Does this matter or do I need an expert? 

A discretionary trust is probably the way to go. Accountants and lawyers can set them up and you should use an expert because there are so many issues to consider.

Regards

Terryw

I would you suggest you search for some of Terry's recent posts regarding the various issues that need to be considered when setting up a Trust.  They are many and varied, with some that would not normally spring to mind.

Terry is a solicitor and, better still, I'd suggest you utilise his services to get the setup right.  A Trust is something you'll be using to protect (among other things) many hundreds of thousands (hopefully more) dollars.  We always get good advice when setting up these structures.

Cheers,  Paul

Paul Dobson - Vendor Financier - http://www.negative2positive.com.au
Ph: 0447 973 235 - http://www.jvpropertypartners.com.au
http://www.vendorfinanceinstitute.com.au

Hi,

In answer to one of your original questions, you will generally find the % listed on the property title search once you have purchased the property too - so anyone who did a search on the property would see this also, as it shows the ownership structure in this information.

Cheers