[Mick CParticipant@shapeJoin Date: 2010Post Count: 1,099]

February 24, 2011 - 8:17 am

andrew.os wrote:

Can anyone tell me if they have been successful in establishing a trust with a company trustee and then borrowing in the name of the trust with a company director as the guarantor?  Currently every broker I talk to informs me that the trust can't borrow money, but rather the loan must be in my name with the trust owning the property.  Has anyone been successful in having a loan in their trust name and just going guarantor as Steve McKnight mentions in his book/seminars?  If I keep pursuing the method that every broker tells me to do, I will soon accumulate a high personal debt that will ultimately prevent me from buy more properties as I get maxed out.

Any help/advice/experiences would be appreciated.

The most common trust structure i normally deal with are:

Mortgage owner— ABC pty ltd as trustee for Chan family trust
Borrower— ABC pty ltd as trustee for Chan family trust
Guarantor

---

Michael Chan

There is a range of combination you can do, some are more complex and some lender will try to avoid them- so work out with your accountant which is best for you; in term of finance – YOU will find a lender that will consider, it just depends on the lender you ask.

Richard would have answered most of your questions; but let me give you a few tip and what to avoid

1. Commercial or residential? – Dont be fooled, some lenders consider this as a commercial deal! but it’s NOT…it should be 100% residental deal..and you should be getting the standard residential rates.
2. Tax – As your aware buying as the trust will give you asset protection and tax advantage. HOWEVER most lenders or some brokers dont know how to structure your trust loan and the most common outcome is the borrowers losing their tax advantage.
3. Trust type? – there are many different type of trust you can set up in Aus, the most common are – Unit, Family, Hybrid and SMSF . Out of this list the one some lenders try to avoid are Hybrid and trust with company trustee, due to the amount of paper work, time and legal issue involved for the same “profit” ….it’s just not worth it to some banks.

One of the banks that i like to deal with in term of trust is Citibank and HSBC- they tend to get it right most of the time.

Andrew — flick Richard an email and he will look after you!

Regards
Michael

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February 23, 2011 - 12:30 am

Hi maccoz,

You wont be able to get the loan based on "end value"…However there are lenders that offer preogressive valution and increase.

Yes residental is possible, but you must have a strong deal- this is something def for the BIG 4 plus some of the bigger credit unions- the smaller credit union won't tocuh 3 units construction.- even if they did; it be like 60% lvR….><

Regards
Michael

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February 22, 2011 - 11:20 am

Kapilv WELCOME!

I have argued in length with the banks and the bank’s underwriter and the LMI provider about this same issue! sigh….
Here is their argument…which mind you, does make sense; but as you can read later on THEY have created this problem!

1. Student accommodation influx in rent and can not be supported- meaning during certain season and month the demand for student accommodation is less ( ie during x-mas when all the students goes back home etc..)
2. Student accommodation limits the type of use …ie can NOT be rented to NON-students and can NOT be used on the FHOG ( ie can not occupied the place UNLESS your a student)
3. Student accommodation are normally under 50 squ meters,

What does this mean? this mean it’s Hardier to SELL these places if the bank had to foreclose a loan! and they will be forced to sell under the original price.

I finance plenty of Student accommodation, the most common pitt falls are FHO and investors who wants to buy this investment at a 90% LVR ( only possible if you have equity in any another home- PPOR or IP)

End of the day, it;s not “hard” to get finance for Student accommodation… it just requires us broker to present the information about a client in a different and creative way and making sure we ask the right lenders.

Regards
Michael

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February 20, 2011 - 10:19 am

Welcome Eric

Yes re-fin as 2 loans:

Loan 1
A. For existing place ( which will turn into a IP)
B. cash out for your deposit ie 20%… ( which will be part of your PPOR loan )

Loan 2
A. New PPOR loan for your new place, using the deposit from loan 1-B.

Regards
Michael

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February 20, 2011 - 10:09 am

Yes agree. if it’s going to be a IP…it will contaminate the loan with a re-draw in terms of tax.

Refin with 2+ loan split would be the smarter option.

Regards
Michael

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February 20, 2011 - 3:57 am

ps. ANZ breakfree loan product is not bad for this sort of strategy.

Regards
Michael

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February 20, 2011 - 3:56 am

Yes they would, But you must have a LOT of equity to suport this sort of lifestyle and investment. I currently have 7-8 clients using this to build and buy all their properties. 

You would be looking more at the BIG 4 for this sort of strategy…,the small banks tends to get scared espeiclly when you have over 1M.

Regards
Michael

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February 20, 2011 - 3:52 am

eric_agape wrote:

If you went to your local bank and asked this same question; what they would tell you is to bring this loan over to them and then they will allow you to take up your 2nd loan using your first home as security – X-cross. A big NO NO! How would you go about this problem?
[/quote]

Hi Michael,
I have a similar situation and have to change to new lender in order to refinance for the existing loan. The bank said what you mentioned. It seems OK because I can utilize my existing property to fund the new own-occupied and also avoid paying mortgage insurance. What is the trick / problem?

THanks,
Eric
[/quote]
 

Hi eric,

Sorry for getting back to you. But what jamie said is correct. So really two options

1. Top up with lender now ( maybe even re-draw ONLINE! no hassle and done within 5 min)
2. Refinacne with Cash out.

Regards
Michael

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February 19, 2011 - 12:38 am

It depends on the council, i mean in my area ( NSW- hornsby) we are allowed subdivision of land and then construct is fine, as long as it meets the land size requirement etc…

If you can’t split the title prior to the construction- you will have a problem….the only way to finacne this IF the bank allows it…is to push both loans thru to the same lender. The deal must be presented well- if its to complex they wont even give it a 2nd thought!

Regards
Michael

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February 18, 2011 - 6:59 am

Scott- that is true you cant really “have a set % on how much you can increase by” – i wont argue on that.

and true 5% is a huge amount to ask for a increase…but if the area your got has a spike in demand- then why not ask for 6?7?8%? it’s within the contract and agreed upon by the tenant.

FYI – http://www.oldlistings.com.au/real-estate/NSW/Haymarket/2007/rent/ Look at 2 quay street haymaket.. Yes it does go up and DOWN…

Regards
Michael

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February 18, 2011 - 6:47 am

It depends on the area and demand…

i have 3 IP:

1- increased by 15% ( 6 month) – Sydney CBD apartment – of course all agreed upon by the tenant
2- increased by 10% (6 month )
3- 5% increase only

Regards,
Michael

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February 18, 2011 - 6:28 am

Luke- That is so true!!!

I have been burnt in the past, lesson learnt.

Regards
Michael

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February 18, 2011 - 5:06 am

Welcome SJP,

Yes you can but there are restrictions, firstly you will need:

1. A solicitor to prepare a contract to say your buying this off the plan and the terms and condition …ie – if the building does not finish within 6 month or what ever the contract is void….end of the day there is a lot you can put into this contract, on yours and your friends agreed terms.

** make sure the subdivision and split title gets approved first ! OR you will have trouble with the finance….

2. Finance approval — this is the Tricky part! to be honest i have done this same deal in the past…but i haven’t done one in the last 6 month!! and the banks tend to change their policy and requirement quite often…SO i will change to check for you….you can email or PMS me more of the details-ie LVR, amounts, Location ( some postcode have restrictions) etc….and i can fund out.

If any another broker can answer this question in the meantime….please do

Regards
Michael

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February 18, 2011 - 4:56 am

PM – would make it less stressful …but in term of return on your property …his fee might eat up any profit you make- since it’s such a Small project! ( normally you hire a PM, if your building more then 6+)

Either way, if you got with a builder that does everything (including fittings and landscaping etc..) at a FIX price, you will find they will assign you a “pm/builder” to your project anyway…..and builders should be able to do everything from “council approval – > Completing stage.

But you will still need to organize your own finance and legals etc…

Regards
Michael

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February 18, 2011 - 4:52 am

Set 5-10% Increase….CPI is only 2-3% not worth your time…

Regards
Michael

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February 18, 2011 - 4:51 am

Keiko – it Depends on the deal and detail…So if you want either PMS some details or post it for all to share

I had a deal for a buyer who wanted to fund some purchase in the US, and it was for a purchase of a Business in the US as well…one would think this is a “commercial/ private lending” deal…But you be surprise to know it was placed as a residential deal at 7.2% interest, 30 years term and with a respectable lender – HSBC.

But in general; most private/international lenders ( if your loan goes to a private lender)
Current rate: Feb 2011

Residential AAA class deal – 7.5% – 5 years term Max
Residential AA Class Deal – 7.8% – Up to 15 Years
Commercial/ Non conforming AA – 8.9%
Commercial/ Non conforming A – 9.5%

B and C class – start from 9% Min.

I will normally avoid private lender like a plague; but if nobody would finance it, or if it gets to hard because of your situation….then you really have no choice.

Regards
Michael

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February 15, 2011 - 12:45 pm

Dust27- your welcome and thanks for the feedback/ testimonial on our company website

Hope to finance your next adventure!

Cheers

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February 15, 2011 - 11:49 am

Derek- Agreed!

The property itself is fine, but due to how the bank perceive the risk ( which are created by THEM!) it make these unit’ pointless in term of capital growth and a headache in term of resale.

But one just has to look at the VIC market and can see the bank is getting it SOO SOOO wrong, there are so many new development ( ie the echo apartment_ where 20-40 squ meters units NOT just student accommodation are being built.
It’s a growing population, and lack of space and houses….it’s time to downsize and the bank should accept this fact!

Regards
Michael

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February 15, 2011 - 10:24 am

Richard good work on the private lender- a shame Yorknxy did not take up your recommendation! Yorknxy – i financed a 23 Squ meter student accommodation in VIC ( echo apartment) only last week..yes it was a private lender. But Yorknxy to be honest reading your post; i think im to scared to touch your loan!!<moderator: delete personal comment> But either way how did you go with this student accommodation? Regards Michael

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February 15, 2011 - 10:09 am

I been able to get it waive because it was a “strong deal”…anther then that; i dont think they would.
But they should considering the another 3 majors are doing so…

Regards
Michael

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