Actually I looked at a St G app a while ago and it didn't ask for guaranteed loans to be disclosed, so I wrote to them and got a confirmation that they would be taken into account.

I forgive you Richard!

Hi Trevor

For some reason this question is coming up a lot lately!

When you reach your limit having a new company/trust will not help you borrow more because the bank relies on personal guarantees. So if the person giving the guarantee is the same it won't really help.

Generally only a discretionary trust is good for investments because it offers asset protection and tax minimisation
It is also a good idea not to have too many properties in each trust – for asset protection reasons.

Why would they be free? someone has to go out and inspect the property and note down al the different types of fixtures and fittings etc.

There are many different ways you could structure it.
eg:

strike price, is it
a) fixed or
b) increasing or
c ) decreasing

Deposit – there is usually no depsoit as it is an option you are selling, so you may have an option fee instead
Option fee
a) is it refundable (not usually)
b) does it come off the purchase price?

Rent, does it
a) reduce the strike price, or
b) not

There are many combinations of the above which you can work with. Sit down with some figures and spreadsheets and run some numbers – otherwise you may be selling yourself short.

This is how I did it in the past.
add 20% to the value and this will be the strike price
Then work out the loan repayments on a 30 year loan, PI and take this as the rent.
Apply a small portion of the rent to the strike price so that it reduces like a PI loan so that after 30 years they have $1 to pay.
Add in clauses so that the rent increases with the CPI

What I found was property prices increased and after a few years the tenants had much more equity than I did. But I guess this is what you pay for the weekly cashflow.

Another way may be to agree on a formula which will give them X% off the market value (average or 2 valuations, 1 by you and 1 by them) when they want to purchase. This way you will get some of the capital growth too.

hi Grant

Please do a search for the IO loans and offset. I have been writing the same stuff over and over again almost daily for years now. I should write something in word and then just cut and paste.

Anyway, the 6 months will satisfy the requirements for the FHOG – but you have to check as each state is different. I think in QLD if you do not live in it for 12 months you need to repay part of the stamp duty which was exempt.

Also I think I forgot to mention fully above, but under s118-145 of the Income Tax Assessment Act you can actually be absent from your main residence and still treat it as your main residence for up to 6 years. So you can buy a place, live in it briefly, establish it as your main residence and then move back home with the parents (or anywhere actually). You can then claim all costs as a normal rental property (interest, rates, water, depreciation, loan costs, travel etc). If there is a loss this loss can be used to offset your other income. And best of all it is CGT exempt as long as it remains your main residence. Also if you were to move in and out again the 6 years starts again.

You can only have one main residence (whether single of between couples too) but it is a big help. Someone could use the years living with parents to save tax and really pay the loan down (or ideally into the offset) and then move in when the negative gearing benefits run out.

I was going to say something similar to Richard.

If it was me, I would look at getting a house and using the FHOG and stamp duty concessions while they are still available. Live in the place for 6 months, or as long as required and during this time do it up as much as you can without spending too much. I would suggest you look at a 80% lend with the 20% coming from your parents in the form of a loan – have a written agreement in place. Make sure you get an IO loan with the offset and save as much as you can into this.

Then after 6 months move back home and save like mad for the next one. After a while the value of the first may have risen and this will help with the deposit for the second. But never cross collateralise the loans. This will prevent you for going forward as fast. Aim for 1 house a year initially and after a while it may speed up as equity and rents increase as well as your increasing wages.

Make a written plan on what you are going to do and when and check it monthly. Also make a written budget. And make a assets and liabilities statement and check it monthly and this will help motivate you too. Also work out watch income you need to 'retire' and how you are going to achieve it  – eg 10 properties returning $5000 pa each.

Keep reading as much as you can as learn.

hi aaabbbccc

Not sure on the franking credits.

Do a google for trusts and read any document from the major law firms. There is heaps out there. taxlawyer.com.au is a good one as is lawcentral.com.au

Also look at the ATO legal database.
I just found these on shares and trusts:
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR9213/NAT/ATO/00001

http://law.ato.gov.au/atolaw/view.htm?locid=%27AID/AID20021070%27&PiT=99991231235958

http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~franking~basic~exact:::AND~credits~basic~exact:::AND~discretionary~basic~exact:::AND~trust~basic~exact&target=JA&style=java&sdocid=AID/AID2004859/00001&recStart=1&PiT=99991231235958&recnum=12&tot=73&pn=ALL:::ALL

hi TLC

Thanks for that. I don't want to make you feel bad after already investing so won't say much more! $9,000 pa is good cashflow.

I think the franking credits would have to go with the unfranked portion.

There are some things to watch out for with franking credits and DTs. The trust must make a family trusty election, and if there is a loss the franking credits are lost.