Trusts don't assist borrowing capacity in my opinion.

A unit trust offers little asset protection, but what it does offer is flexibility.

The different, day to day, in owning in a personal name or owning in a unit trust with a person owning the units will be very similar. Almost same tax treatment, especially of you borrow to buy the units.

But hte flexibility if offers is much wider – the unit trust offers:

– the refinancing principal

– the ability to transfer units at less or no stamp duty, without needing to change the title deeds

– the ability to transfer units to a SMSF (impossible with residential property if owned by a person)

– ability to put in a discretionary trust later on

etc.

This doesn't make sense for 2 reasons:

1. This would make your property even more negatively geared.

2. Why pay more than double the interest rate to do so?

Fees and interest could be deductible under certain conditions.

Option 1 may be not so bad depending on the long term plans. If you do take option 1 and cannot pay the loan for whatever reason the bank will sell your house from under you. It is generally better to have the investment as security so that this is their first line of attack if things go bad. But, if you are doing a reno and intend to sell in the short term then maybe 1 is the way to go.

Could you repeat the question please? (only joking!)

Generally not, but if the property is in Victoria or if there was a possibility that the property could be lived in at some stage in the future then maybe.

Why is this so?

Because with a discretionary trust there is no guarantee that any beneficiary will receive an income from the trust. This is the case even if the beneficiary is the one that controls the trust. Therefore any borrowings to be ‘invested’ into the trust would be done with the possibility of not getting any return and this would not be a commercial transaction.

Using a unit could could enable the borrowings to be deductible. If the borrower borrows to buy units in the trust and they have fixed entitlements to the income and capital of the trust then the interest would generally be deductible. They are borrowing to buy income producing units.

If the trust is a fixed unit trust then it may be possible to access the land tax free thresholds too.

Furthermore using a trust may enable the units to be transferred to a SMSF down the track too – possibly without stamp duty. Imagine having your property owned by a SMSF where in retirement there is no income tax and no CGT.

I take it these properties are in Victoria? Have you considered CGT too? Part IVA? It is an excellent strategy, but be careful

You can sell at any price, but because the parties are related you could only claim tax on the basis of market valuations. Increasing the sale price probably won't mean any increase in loans. this may mean no effect on claiming the interest. But in the future when you sell you may have to take into consideration the value at purchase rather than the purchase price.

I would suggest you seek tax advise separate from the fin planner to be safe. Fin planners can give limited tax advice but they are not as thoroughly trained.

Sounds like you are relying on luck. Probably the wrong property in the wrong area. Is it regional?

You would have actually lost money on this property considering the interest and other payments and inflation.

What sort of rent return?

Any connection to NSW? NSW has some pretty extensive family provision laws. Ex wives can make claims on estates of their dead ex husbands (or even lesbian partners). This can include notional estate orders covering assets that you do not even own.

Then you have the family law side of things and the law of equity to deal with.

Loan documents are the least of your problems

Hi.

I am not much of an economist so cannot comment on the above, but generally… I went to work in Japan in 1990 right at the top of the boom. I was making huge amounts of money doing average jobs. Now I am a NAATI qualified interpreter and have 2 children going to Japanese public schools. My family also owns a few houses in Osaka.

I would never invest in Japan. Not in real estate and not in shares. Not even in business. I just returned from Japan last week and the shops are still busy with people buying still, but prices haven’t gone up in 20 years. Japan is extremely cheap to live. $4 for a sit down meal in a restaurant in Osaka CBD for example. Housing is cheap, rent is cheap, cars are cheap. It is cheaper to shop in Japan than it is in Thailand. I buy all my clothes in Japan even though I stop in BKK on the way back. Off the top of my head I can’t think of anything that is more expensive than in Australia.

There is a restaurant near my house, it has about 10 customers per day if that. About $8 per meal – how can they make money? Its been like this for years. And there are many shops like this.

A few trips ago I went with a client (all expenses paid) who wanted to purchase a helicopter. We travelled around to many aviation companys and I was surprised with the number of Chinese working there. They speak Japanese and English and are infiltrating major businesses. In Tokyo in one of the kings cross type areas I was constantly approached by Chinese prostitutes on the street. I thought I still had it when I was approached by a young sexy girl asking me in Japanese to go for a drink – only to realise she had an accent and it turned out she was Chinese and inviting me to a special bar.. Then I travelled up the coast to Nagoya and stopped at some smallish towns – more Chinese prostitutes. Lots of massage places too – probably staffed with Chinese female masseuses.

I was also surprised on one town to find a very large population of young south americans living there. Some signs were also in another language – possibly portugese. They are all immigrants and go to school there.

Japan would be a great place to retire too. You can rent a small house in the countrside for next to nothing. In Osaka around $1000 per month would get you a nice house – even less in the countryside.

Just some recent observations

I would say $2,000 to $20,000 to set up. Def have a company as trustee and I agree with Shahin St G is one of the best lenders out there.