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  • Avatar of sydneyinnsydneyinn
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    @sydneyinn
    Post count: 9

    Hi there, I just finished reading "0 to 130" and Steve says:

    "The way to get around your borrowing limit is once the ABC Bank has said 'no more', create a new trust structure and approach a different bank…"

    i) Does this work?

    ii) Is this easy to do?

    iii) How much does it cost to start a trust?

    I currently have one investment property under my personal name (in Sydney), which is almost paid off, and would like to invest in more properties via this method if possible.

    Many thanks in advance.

    Avatar of RedwoodRedwood
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    @Redwood
    Post count: 153

    mmmm interesting 

    "The way to get around your borrowing limit is once the ABC Bank has said 'no more', create a new trust structure and approach a different bank…" 

    Not sure what is eluded to here however, you can always find a bank to get a loan……

    One structure to think about is through an SMSF, its called a limited recourse borrowing arrangement or 'bare trust', its used to borrow to invest in property, extremely popular however, i'd suggest a balance of ard $100k and banks allow 80% for residential and 70% for commercial property purchases. 

    Sorry if I am not answering the question directly but I have not read the book….

    Redwood | Redwood Advisory - SMSF Specialists
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    Avatar of TerrywTerryw
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    @Terryw
    Post count: 14,560
    sydneyinn wrote:
    Hi there, I just finished reading "0 to 130" and Steve says:

    "The way to get around your borrowing limit is once the ABC Bank has said 'no more', create a new trust structure and approach a different bank…"

    i) Does this work?

    ii) Is this easy to do?

    iii) How much does it cost to start a trust?

    I currently have one investment property under my personal name (in Sydney), which is almost paid off, and would like to invest in more properties via this method if possible.

    Many thanks in advance.

    Hi

    I am a solicitor specialising in trusts and a mortgage broker as well.

    My answers:
    i) no
    ii) no
    iii) varies considerably. You could set one up yourself for free, or you could use a solicitor. I charge from $1100 to set up a trust with a consultation and written legal advice. You should seek specific legal advice as I have seen a lot of people stuff up trust set ups (including accountants) and this can cost a fortune to fix.

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
    Email Me

    Law, Loans and Tax

    Avatar of sydneyinnsydneyinn
    Member
    @sydneyinn
    Post count: 9

    Thanks Terryw, I suppose it sounded too good to be true… is there any truth in what Steve has written about using Trusts to purchase properties?

    He also writes: "Using multiple trusts and multiple lenders to source loans that I am guarantor for is one of the secrets to how I have borrowed tens of millions of dollars and bought hundreds of properties. I continue to use this approach with my investing today…"

    Is there any possible way to do what Steve is alluding to?

    Thanks.

    Avatar of tommytuckertommytucker
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    @tommytucker
    Post count: 82

    I haven't read Steve's other books, only the first one, but I found it lacked detail on how to actually execute the minutiae of his plan which is where the real magic would be. Broad unexplained statements which on the surface sound confusing and therefore plausible but when you look into it…we'll I haven't but nevertheless the detail about his exact methods is definitely lacking. I think unless you know how to do it or have an advisor who knows his methods you'd be hard pressed to replicate his performance.

    Correct me if I'm wrong oh-learned-ones :-)

    Avatar of Jamie MooreJamie Moore
    Participant
    @Jamie-M
    Post count: 4,589

    You're not going to improve your borrowing capacity by using a trust. At the end of the day – the individual behind the trust will need to declare their assets/liabilities just as they would if they were applying for the loan under their own name.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Avatar of TerrywTerryw
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    @Terryw
    Post count: 14,560
    sydneyinn wrote:
    Thanks Terryw, I suppose it sounded too good to be true… is there any truth in what Steve has written about using Trusts to purchase properties?

    Is there any possible way to do what Steve is alluding to?

    Thanks.

    Yes. Have different people behind each trust. You may be behind one and then your spouse behind another. Needs careful planning.

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
    Email Me

    Law, Loans and Tax

    Avatar of TerrywTerryw
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    @Terryw
    Post count: 14,560

    Trusts can improve borrowing capacity in another way.

    e.g You own a house in your name. High growth and then you suffer a default – something innocent. You apply to a bank but they won’t allow you to access the equity. You wait 5 years to get back on track.

    or

    You are director of a trustee company which owns the property. as above you suffer a default. You resign as director and put in your spouse who has no defaults. Loan is approved because you are not involved in any guarantees or assessments (depends on how the trust is set up).

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
    Email Me

    Law, Loans and Tax

    Avatar of sydneyinnsydneyinn
    Member
    @sydneyinn
    Post count: 9

    Thanks heaps Terryw! Your assistance has been much appreciated!

    Avatar of Shiny_Suit_ManShiny_Suit_Man
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    @Shiny_Suit_Man
    Post count: 54

    You need to remember with Steve's book that he bought properties years ago and has been fortunate to have massive capital gains which meant he could have a rental increase as well as use the equity to fund more investing.  Steve's use of trusts (i have read most of his books) was a large part for protection incase of him being held liable should circumstances change so he couldn't loose his family home or all of his investments for example.  His structure was quite complicated and i don't think he really fully explains his entire setup.  These days to receive the gains he did is virtually impossible and we need to work a lot harder.  After all, he bought some places near where i was born for 60-80k and they are now worth over 200k without any work…. His books offer a lot of good advice and i learned a lot from them.  But things are different now to when they were written.

    Another reason for the trust was distributing income for tax purposes to minimize the amount of tax he paid.

    Avatar of sydneyinnsydneyinn
    Member
    @sydneyinn
    Post count: 9

    Thanks Shiny_Suit_Man! Much appreciated.

    I wish I had read his book many years ago, and was able to implement his suggestions.

    Is it still worthwhile setting up a company and trust still?

    Avatar of wilko1wilko1
    Participant
    @wilko1
    Post count: 471

    When applying at another bank Re 10 plus years ago. Some banks didn't ask on their loan applications if you were guarantor of any other loans. So you were able to bypass them seeing you had given a guarantee previously. Closed loophole now. 

    "Is it still worthwhile setting up a company and trust still?"

    That's why you should should seek financial advice 1k plus in advice could cost you a lot less in the long run.

    Avatar of TerrywTerryw
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    @Terryw
    Post count: 14,560
    wilko1 wrote:
    When applying at another bank Re 10 plus years ago. Some banks didn't ask on their loan applications if you were guarantor of any other loans. So you were able to bypass them seeing you had given a guarantee previously. Closed loophole now. 

    "Is it still worthwhile setting up a company and trust still?"

    That's why you should should seek financial advice 1k plus in advice could cost you a lot less in the long run.

    Wilko, this was never a ‘loophole’. Many Lenders still don’t ask about other loans guarantees.

    A trust is a legal arrangement so financial planners cannot advise on trusts – or companies. This is legal advice which can only be given by a lawyer.

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
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    Law, Loans and Tax

    Avatar of AjaxAjax
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    @Ajax
    Post count: 60

    What about using a Pty Limited company to purchase an IP?

    Does this avoid the National Consumer Credit Protection Act requirements?

    What are advantages/disadvantages of an IP held in a Pty Limited company?

    Avatar of TerrywTerryw
    Participant
    @Terryw
    Post count: 14,560
    Ajax wrote:
    What about using a Pty Limited company to purchase an IP?

    Does this avoid the National Consumer Credit Protection Act requirements?

    What are advantages/disadvantages of an IP held in a Pty Limited company?

    Yes, it would not come under NCCP – but why are you trying to avoid this?

    Major disadvantage is no 50% CGT discount and fixed shareholdings – which could be held by a discretionary trust to get the flexibility.
    May also get a new land tax threshold

    Terryw | The Loan Experts Pty Ltd | FinLaw Pty Ltd
    http://www.terryw.com.au
    Email Me

    Law, Loans and Tax

    Avatar of wilko1wilko1
    Participant
    @wilko1
    Post count: 471

    Perhaps trying to avoid it. Due to a lack  of loan Servicablity, if his current job vs existing debt isn't enough to support a new loan. 

    Avatar of AjaxAjax
    Participant
    @Ajax
    Post count: 60

    wilko1 is pretty much on the money.

    The lack of 50% discount for CGT is a big negative though.

    .

    Avatar of Richard TaylorRichard Taylor
    Participant
    @Qlds007
    Post count: 11,190

    Yes i cannot see why you would want to try and get around the NCCP legislation even for serviceability.

    It is simple if you can't show you can service the loan you cannot afford.

    I am not talking about Tax Returns as these are not always required by lenders.

    Cheers

    Yours in Finance

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
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    Mortgage Brokers specialising in Investor Loans. Request a copy of my API interview 0-40 in a decade

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