All Topics / Finance / Researching loan options – advice needed.

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  • Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    Hi Guys,

    Currently myself and 3 others are looking into getting into investments and as such have been researching what is required, how to setup etc.

    Currently we are looking at setting up a Unit Trust or Hybrid Trust with a Pty Ltd Trustee which we would all be directors.

    Does anyone know of any Lender that can provide multiple offset accounts? ideally 5 in total (1 for each person and one for Trustee) for any day to day cash, income and savings to offset the primary home loan to reduce interest?

    Ideally this would be so each of us can track our own funds whilst reducing interest therefore we're not concerned about negative gearing implications, only to reduce the interest paid on the primary mortgage that we would be running from.

    Any help, advice etc would be appreciated :)

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Yes there are a couple but unfortunately they will not lend to UT or HDT's even on full doc.

    More and more lenders are shying away from such structures so tread carefully.

    Have had many people appraoch me over the last 12 months wanting to refinance out of their current lender but because of the nature of the entity under which the property was held this was not possible.

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Get some proper advice first.

    Why have 5 directors?? 5 times the risk. This will eat into your future serviceability too. I would look at having one director.

     

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    Thanks guys.

    as i mentioned, just researching at the moment, and have an appointment with my accountant this Thursday and would like to discuss what i find with him etc

    A couple weeks later with a solicitor.

    the Pty Ltd Trustee would only be 4 directors and transactions would require to be co-signed so as to be 'fair' and everyone knows its all above board etc

    How would this effect serviceability?

    Profile photo of magic32magic32
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    @magic32
    Join Date: 2005
    Post Count: 49
    Qlds007 wrote:
    Yes there are a couple but unfortunately they will not lend to UT or HDT's even on full doc.

    More and more lenders are shying away from such structures so tread carefully.

    Have had many people appraoch me over the last 12 months wanting to refinance out of their current lender but because of the nature of the entity under which the property was held this was not possible.

    Is the HDT the normal/most common way to protect your assets. So if no lender is willing to lend to HDT's then how we protect our assets as well as being able to get finance, or is there some other common structure. Also if they do not lend to HDT right now, then should we structure it in a different way in the boom times to avoid the situation of not being able to refinance in the current conservative times.

    I am not that familiar with the various forms of trusts.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    No A DFT is probably the most favoured way of protecting your assets but like everything it has certain drawbacks dependant on your own position and circumstances.

    Didnt say you couldnt get finance just that there are less lenders by the day.

    Richard Taylor | Australia's leading private lender

    Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    can non family members be a member of a DFT?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    I am assuming the question relates to beneficiaries of the Trust.

    Answer is that the Trustees will nominate the beneficiares.

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Trustees can only distribute to the beneficiaries or class of beneficiaries. Usually a deed is worded such that the family of a named beneficiary, trustee or director/shareholder of the trustee is all included. So if you marry, have children, adopt children, get some step children etc they should all be automatically included without being named.

    If you do go down the path of only having 1 director of the trustee then just make sure this is considered as it may be that the other people are not named beneficiaries and their family may not automatically be included. Once the trust is setup you cannot add or remove beneficiaries without huge tax and stamp duty consequences.

    Having all people guarantee the loan will mean that in future when they apply for more loans – even for their own personal property – then they will be assessed as if they owed the whole debt of the trust. This can hurt!

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    Well I had a good 3 hour chat with my accountant today, lots discussed and lots learned.

    we're leaning towards the Unit Trust structure, the accountant is going to provide a sample trust deed for us to take a look.

    Will check around as well, going to book in to see Gatherum-Gross & Associates as well, has anyone here personally dealt with them?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    A unit trust is great when different parties are involved. They allow the break up of profit in fixed shares, but offer no tax benefits or asset protection.  Look at having your units owned by a separate discretionary trust.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    Hi Terry, I don't quite understand how that would work, would all of us be in the discretionary trust, or would we each have our own?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    hi it

    You would each have your own units, like shares in a company. eg 100 units with 5 people = 20 units each. You could each hold these units in your own names, or jointly with a spouse, or, preferably via a discretionary trust. What the others do with theirs is up to them, but it would be preferrable if each had their own DT incase of bankruptcy. You wouldn't want 3 of them to go bankrupt (eg they do another JV project between them) and their creditors get their units and control of the trust.

    Anyway, if you do it like this and there is a profit of, say $100,000. each partner would get $20,000 profit and this profit, if in a DT could then be distributed to the lowest income earners of your family. I think each kids is allowed $2666 each year before paying tax. A non working spouse can earn about $11,000 pa with no tax etc. This can save you a bit.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    wow.. Thanks Terry,

    we hadn't thought about a setup such as you suggested, when I speak to our advisers, I will be sure to bring this up.

    Thanks again.

    Profile photo of itblokeitbloke
    Member
    @itbloke
    Join Date: 2009
    Post Count: 10

    With the structure that Terry mentioned, how would one take out a home loan for investments? under the DT to purchase units?
    wouldnt the Bank want some kind of security?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi IT

    Yes, bank woud want security – more than neccessary usually.

    Firstly they would want the trustee to guarantee the loan, then they would want all the unit holders to guarantee the loan. If the unit holders are companies, all the directors, if the unit holders are trusts, then all the trustees.

    So it can get messy and it can be difficult to find a lender for unit trusts too.

    What is good from a tax or asset point of view is not always good from a lending point of view.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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