just because a property is positive geared doesn’t mean it is a good investment. Banks will base their serviceability calcs with some stress involved – say 7% PI loan for all debts, 80% rents and large living expenses.

You could try different banks, but unless your salary is up very high you will have problems qualifying for finance after a few…[Read more]

Consider the structure of the company when setting up – parties such as who should be the director and shareholders how the constitution should be structured and also tax considerations, land tax, depreciation and franking credits etc.

Once the company is set up it can apply for the loan with the director(s) giving personal guarantees. Same…[Read more]

Yes.

The repayments are not income but part payment of capital and part income.

Also it would generally be a breach of the mortgage agreement to onsell a property via an instalment contract without express approval from the mortgagee.

They are basically frowned upon.

Merry Christmas

Don’t forget to claim a tax deduction (TD 2016/14)

The problem you will face is the legal requirement for a lender to make sure any loan to you is not unsuitable. This means they have to consider your ability to repay the loan without undue hardship. Therefore low doc loans are not so low any more. However if you will be purchasing using a company, whether in its own right or as trustee, then this…[Read more]

Giving a personal guarantee generally means the lenders will assess you as if you had borrowed the money yourself. However it will come down to the lender and how deep the dig.

Bankruptcy stops them from chasing the debt. If you default on the loan the mortgagee will still take possession of the property, sell it and then chase you for any shortfall and potentially end up bankrupt.

lease docs are not non recourse.

I don’t know of any lender lending on a non recourse basis in Australia.

Impossible to answer these sorts of ‘should i’ questions.

It is easy and straight forward to do but have you considered:
1. asset protection – does the company trade?
2. succession
3. land tax
4. income tax
5. capital gains tax
6. structure of the company – who is the director and who are the shareholders.
7. asset protection on shareholder lever
etc

Vendor may have problems getting tenants out in time for settlement and wants to push that on to any purchaser.

FXD

Sounds like you mean lease doc loans.

A non recourse loan is one where the lender will only take the security property but not chase the purchaser for any shortfall on sale. These exist but are rare.

The lender will take the existing rent and you income into account when getting the $76k loan. They won’t take into account rent from a proposed purchase unless this is happening at the same time – and then they will take the debt into account as well.

I don’t do commercial loans so am not up to date, are non-recourse loans even available?

A lender, when applying for further borrowings, will assess you on your income, the rent from the property and the debt you have for this and other loans – with buffers on top.

Perpetual borrowing ability won’t exist as you will either run out of income or…[Read more]

To work out how much extra you could possibly borrow use this formula

(Valuation x LVR) – (existing loan)

So if the value is $1.092 and the existing loan is $634K you could borrow an extra $76K at 65% LVR
($1.092 x 65%) – $634k

But you will still have to pass other hurdles such as the valuation coming in and serviceability.

Its pretty straight forward. Have a look at the examples.
Consider example 3 – it may be a way to reduce tax.

Thanks Benny

I am a lawyer specialising in trusts – if you have any questions ask away

You might have to try an accommodation bond loan in that case.

Another option is for a family member to borrow and onlend to MIL under a formal loan agreement. Loan can be paid out from the estate (if MIL dies first).

You should get a separate loan. IO if you can redraw from the loan account, if not then a LOC>

If you top up you will have a mixed purpose loan.

CGT probably won’t apply.

Assuming it does,

get a valuer in and work out what each block is worth. This should give you a % which u can use to apportion the original price and costs. Any specific costs to each block should be taken into account for the cost base for that block.

You cannot cut in in half because one block has a house.