You don’t have to go overseas or to outback towns. Last year 2 of my clients purchased positive geared properties in Sydney – without wrapping or lease optioning.

Terryw
Discover Home Loans
North Sydney
[email protected]

With outback properties, prices are generally rather flat. Not much capital growth occurs.

Without capital growth, there is not really any point in investing in a property. So you have to determine the potential growth prospects for the area you are looking to invest in.

Terryw
Discover Home Loans
North Sydney
[email protected]

The trouble is some people equate being creative with doing things dishonest or illegal.

Maybe one way around you dilemma is to ask for vendor finance, or to try to borrow the deposit elsewhere.

Once settlement has taken place, you could then refinance or increase your loan.

Terryw
Discover Home Loans
North Sydney
[email protected]

Banks are conservative.

One way around this would be to pay cash, settle on the property and then immediately refinance.

Terryw
Discover Home Loans
North Sydney
[email protected]

I am not an accountant, but….

eg. Mr X sets up The X Hrbrid trust with X Pty Ltd as Trustee.
A property is purchased by X Pty Ltd as Trustee for X Hybrid Trust.

Mr A then approaches a bank and asks for the loan to be in his personal name, with the loan being securred by the property.

An accounting entry is made to indicate Mr A is buying a number of units in the trust for $xxx.

At tax time, Mr X claims the interest on the loan against his other taxable income.

The trust usually makes a profit (because it is not paying interest). This profit can then be distributed at the trustee’s discretion. I am not sure if all or at least some of the income has to be distributed to the unit holder (to make a relationship between claiming an expense and making an income).

I don’t use a hybrid trust and am not sure that is entirely correct, so please check with an accountant.

Terryw
Discover Home Loans
North Sydney
[email protected]

Lawboy,

Are you mixing up a few things there?

With an instalment contract, the title doesn’t change over until they make the final payment. Wraps (instalment sales) involve the repayment of a loan. Lease Options involved the repayment of rent – usually rent is not refunded if someone moves out.

In the case you cited, I can’t see how this relates to wrapping (or lease options). Someone sold a property at an inflated price, fraudulently obtained a loan with a major bank for their ‘client’ (without their knowledge) and then charged them a large fee secured by a second mortgage stitching them up big time.

Terryw
Discover Home Loans
North Sydney
[email protected]

Yes, it sounds confusing. If a property is costing you money, how does it help you pay off other debt? On the face of it, I can’t see how this could happen in the short term, unless the investment was sold at a profit and the proceeds paid into the home loan.

Terryw
Discover Home Loans
North Sydney
[email protected]

I’ve purchased around 10 properties using buyer’s agents. All were in areas far from where I was living, so could not check on myself. All were good buys, except one.

Terryw
Discover Home Loans
North Sydney
[email protected]

One way to do it maybe to pay cash (using a LOC) and then get the loan. They could then base it on value since you would already own it. Of course, not many people could do this.

I know of one lender that could do it based on valuation – with a max LVR of 70%. But rates would be higher than normal.

And one more point. Are you sure your valuer will reassign the valuation conducted into the lender’s name? If the bank has to re-order the valuation, it is likely the same valuer will revalue much lower -especially if the purchase price is known.

Terryw
Discover Home Loans
North Sydney
[email protected]