If you are just building one house on your block, then there shouldn't be too much of a problem. You can still get finance as a 'owner' builder. If you are going to building big stuff, then this is different. You would be a developer and this would mean different criteria. And I think you would need to be a licenced builder to build anything other than your own home.

The one dwelling per 3 years is a Dept Fair Trading rule. Nothing to do with borrowing money. And according to the DFT you will be a licenced builder anyway, so this rule wouldn't apply.

It depends on how big the project is. If just a house or duplex etc and you are building it, then you are classed as an owner builder by the bank. This has nothing to do, really, with the council or dept fair trading requirements on owner builders – which probably wouldn't apply if you were a licenced builder anyway. And just because it is classed as an owner builder doesn't mean you cannot get finance.

The ATO stance also is not related. ATO will want a share of the profits if it is an investment. If there is a company owning it or constructing it, then there will be taxes involved. If you are owner occupied and building it yourself, then there may not be.

Depends on the location of the land and the other parties position. If it is high risk you should expect more. Also you would need to make enough to make it worthwhile – think of the other things you could be doing with your money in the meantime.

You could paint it? add curtains maybe?

You are only increasing one loan to pay down another. Normally it would not be of any help, with claimable interest being the same, but since your property is in NZ, I am not sure of the tax rules – although you are probably paying tax on it here.

How many in the block?

One of my friends was running a business as a sole trader (bad idea!) and he was sued for $800,000 because of an employee fraud.

If you are not in business, there are still many reasons why you could be sued. eg. You have an accident and are not covered. or you house floods with the insurance company claiming they don't cover floods, only rain damage. House is now worthless, but you owe hundreds of thousands – but your employer has gone bust too because of the floods. You can no longer meet repayments and go bankrupt.

There is nothing wrong with Hybrids if they are set up properly.

In the past they were set up like this:
Discretionary portion and Unit portion. The unit holder borrowed money to buy his units. He claimed the interest against his income. But because he was the highest income earner, the trustee distributed income from the trust to other beneficiaries on lower tax rates. The ATO came along and said, this guy is claiming all the interest, but not getting any income. So there is no commercial justification to claim the interest. Later on if the property was sold, the trustee also had discretion to distribute the gain to other beneficiaries too – ie beside the unit holder.

So to get around this the deeds have been reworded (or the good ones), so that the trustee has no discretion while units are issued. That is, the income and the gain (or part of the gain) must go to the unit holder. But this has reduced some of the attractiveness of the HDT. Units are property and in the event of bankruptcy, they can fall into the hands of creditors – which is not good as they will get their hands on your income. Also if the place is sold, then the CGT must go to the unit holder, who is usually the highest income earner.

But I think this is still better than holding a property in your own name for a few reasons.
1) the units can be redeemed by the trust and it can operate as a discretionary trust. This can be done without stamp duty, but CGT would be payable on the gain in the units. This may be able to be minimised by transferring units gradually.

2) The refinancing principle. The trust can borrow to buy the units thus releasing funds to the owner of the units who can then pay down personal debt. The trust should be able to borrow to buy back the units (income producing). So you are really able to claim the interest on personal borrowings.

3) In some states you may be able to transfer the property to your SMSF without the need to pay stamp duty.

Why Banks don't like them:
Usually the bank will only lend money to the owner of the property. With trusts the legal owner is the trustee. So if you have a company as a trustee, then the company name is own title. But for the negative gearing effect to work, the interest needs to be claimed by the highest income earner (bigger deductions). So it is usually the highest income earner who borrows to buy the units in the trust. That means the loan will need to be in their personal name, with the property owned by the company. Many banks do not like this – they call it 3rd party lending, or lending to someone who is not the owner.

There shouldn't really be a problem with a HDT if the deed is worded correctly. It will need to make all of the income and CG (or a portion of it at least) go to the unit holder. After a few years the unit holder could sell the units back to the trust (and have to pay CGT) and then the trust will revert to a discretionary.

The main advantages of a HDT are:
1) the refinancing princple (trust borrows to buy the units back which increases tax deductions and releases money to pay personal debt)
2) the ability to transfer the property to your SMSF without incurring stamp duty later on.

Both of these options are not available for DTs.