Mathew,

Since the offset is not a loan, paying money in and out will not affect the deductibility of interest of the loan.

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If you are going to use a LOC, St G have one of the best products – called the Portfolio. It can have many sub accounts (maybe one for each property), and these can even be in different names.

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You’ve had some bad advice there. This won’t work for taxation reasons.

Ideally you need a LOC and a 100% offset account. Pay all of your cash into the offset, and then borrow from the LOC to pay expenses, and for deposits.

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Trude, which state are you in?

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Hi Troy

I am not an accountant, but can offer a few points.

It may not be a good idea to rent out your home without living in it first. If you live in it first, you could class it as your main residence, rent it out, claim deductions and still be able to sell it CGT free.

1. Mike at http://www.guardianpartners.com.au is the best account that I know of for this sort of thing. Think they have an office out west somewhere – still worth a drive even if far.

2. Lenders have different policies on who they require guarantees from. Some would allow the spouse to guarantee even if not on title or director. Maybe the wife could be a shareholder of the company, if necessary. Maybe you could still service without including her – which may increase your borrowing cap later on.

3. The Trust/Company borrowing capacity is determined by your personal income. Having a brand new trust with no assets is not a problem.

4. If the trust has one property, then your income plus the rental income from that property can be taken into account.

5. There are a few books around on trusts. Probably best to look on the net for articles. eg. http://www.lawcentral.com.au and http://www.taxlawyer.com.au plus http://www.chrisbatten.com.au

The general books are usually too general, the legal books are generally too complex to understand. There is not much in between. One I have is called “Trust Structures Guide 2005”. Don’t know if a new edition is out yet. It is good, but bloody expensive – about $350. Covers most trusts, and a bit on structuring business etc. This is in a few libraries, so you can borrow and save the price (deposit on a small property!)

If you want to look at the legal side of things, try search the uni second hand bookshops. They often have old editions of law textbooks going very cheap.

6. Yes, you have the idea. Directors sometimes go down with the company, so having one director (who owns nothing) will be a good asset protection strategy. It will also limit the amount of personal guarantees too. You don’t want you wife guaranteeing a loan if she doesn’t have to. This creates risk and limits borrowing capacity.

When setting up your deed, you need to be careful. If you name beneificaries, this could create problems with getting loans. Some banks (eg. Bankwest and RAMS) require personal guarantees from every adult named in the deed! Other banks, such as St. George want every adult beneficiary to sign a letter acknowledging the know the trustee is borrowing. This could be a pain if you have named your extended family. So talk with the person that sets it up, and try to keep this in mind.

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Crashy, you had me confused. You are using broker to refer to the real estate agent/

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Hi

Don’t think you will find a lender who will lend on end value. Just on the value or the contract price, whichever is lower.

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Hi CP

One way to do it is buy a place, live in it, and then rent it out – as you are going to do. Living in a place is costly, but renting the same place is usually much cheaper. Compare the mortgage on a $400,000 unit with hefty strata fees to renting that unit. Sometimes 50% difference.

But did you know you can still claim the place being rented as your main residence? And this can result in nil CGT if sold? See s118.145 of the ITAA,
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.145.html

So you can sort of do what you wanted to do. You can still claim the interest on your home loan, but just not live there. You can then invest the extra money you are saving by paying a lower rent.

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quite safe?

Not necessarily. These sorts of companies lend to people who have problems getting normal finance. It may be secured by property, but things can go wrong and there are shortfalls sometimes.

Does this company have a prospectus?

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