i agree with the offset. LOCs should only ever be used for borrowing investment expenses. If you stay putting money in and out of a loan you will create a tax timebomb.

yep, see s 68 Duties Act (NSW)

Whatever you do, don't buy a property in the same trust that is running a business – otherwise if your business fails you could lose the property.

Selling your house to a trust is certainly possible. Trusts can deduct interest etc like an individual can, but you cannot negative gear against your own personal income. But if you have a business this shouldn't be a problem anyway.

If I was you I would immediately change to an interest only loan. 100% offset would be good, but not essential as you will be buying a new PPOR and should have the offset against this loan to save non deductible interest.

Hi

if you are going to sell you should focus on exit costs more than rate – some of the cheap rate loans have huge exit fees. I would suggest IO for any loan, and having an offset account would be good too.

You would need to look at structuring the ownership of the property – do you use a trust or individual names etc. You should talk about this with your lawyer or accountant and mortgage broker.

There is no period where you don't need to pay CGT for an investment. If you sell within 2 days tax would be still payable. But you do get 50% reduction if the asset is held more than 12 months (from date of contracts).

There may be some overheads you are unaware of……..

And you lawyer should be able to help with the agreement on buying together.

Sounds strange to me – and maybe you have misheard your accountant?

If you currently have a loan on a property which you are living in, the interest is not deductible as the funds were borrowed to buy a private asset. But if you were to move out of that property and rent it the interest on the existing loan would be deductible as the asset is now income producing. The purpose of the bororwings was to buy a property and the deductibility depends on the use of the property.

However, if you were to increase your loan before moving out and use these funds for the new property then the interest on this portion will not be deductible as the funds were used for private purposes.

Double check and then if your accountant doesn't agree with this get another opinion – or it could cost you dearly.

Julito

If you are an investor I would bite the bullet and get out now. Otherwise you are going to be hit with this problem everytime you want to increase your loan – no matter what the LVR you will have to pass the LMI hurdles.

Hi Andrew and Richard, thanks for the replies

I have done 6 wraps myself, many years ago now, and that was my main reason for thinking they are not worth the bother. The properties I purchased and then wrapped made me small weekly incomes and smallish capital gains when cashed out, but then you factor in stamp duty and all the other costs and it all adds up. Then comparing it to what if I had just rented them out and held – I would have been far better off. Add to that the potential legal problems…And, by the time I was cashed out properties had grown so much it was hard to buy more with the small proceeds obtained.

But, it is different when dealing with huge portfolios, and I guess it is no different than selling a product. And the main thing is to do some buy and holds as well.
 

I think you would have to be crazy to buy a property in an inferior area with little growth prospects. There would be no point, in my opinion, even if you were making positive cashflow.

These days good properties in Sydney or other capital cities would be close to cashflow positive – some even positive. Rents will grow as well, so if there is a loss in the early years this will certainly help as will the capital gains.

Hi Andrew

When someone is bankrupted they have a debt which they cannot or will not pay. The creditor usually has a judgment against the debtor and once they have this they can get a court order to sell any of the person's property and recover the debt that way. A bank will have no say in the issue. What you are talking about is if the person were to stop making their repayments. But what if they are bankrupted for other reasons?

This would result in the purchaser under the installment contract having to enter into a legal battle with the vendor's creditor. Who would have priority? I think probably the purchaser would, but it would still be legally messy.

Another potential problem could occur if the purchaser defaulted on their payments and they are kicked out for breach of contract. What happens to the improvement and the equity from capital growth for the property. This can be messy too – but I think the purchaser would probably win – but it may be another legal battle.

And, caveats, I dont think they expire after 3 months in every state – not heard of this in NSW and i am sure the purchaser would have a caveatable interest due to the exchange of contracts so they justification to lodge a caveat – but this is not really a form of protection, it just stops further dealings of the property.

I am not keen on vendor finance from the purchasers side – because of the potential legal problems, or from the vendor's side – because of the potential legal problems as well as the low returns.