Marc

I think you have confused yourself somewhere. No credit cards are needed, just you borrow a portion of the growth to use for living expenses. Keeping it low allows for periods of low growth. It is nothing like selling your real estate and then renting it back, but the opposite. Where as you wuld otherwise has to sell, you instead keep the property and just access a percentage of the growth. That way you get to keep the property and then acess to future growth. I know somebody who is doing this with only one property – he is just taking some money supplementing his income between jobs.

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi Dolly

Lenders don’t really like taking into account incomes from pensions.

Depending on the locations of the properties, you may be able to get an asset loan at 65% LVR – no income declaration required. eg using your partners cash, you could probably buy something around the $360,000 mark – leaving your loan as it is. Intrest rates are higher for these loans – around 7.5%pa.

Terryw
Discover Home Loans
North Sydney
[email protected]

Bardon

I think it is better than that. You borrow money to buy the income producing units in a unit trust, so all interest is claimable against your personal income. As the trust is not paying any interest, it makes a large profit which can then be distributed at the trustees discretion. I am not sure if there is any requirement to distribute all or just some or none to the unit holder (aferall, if they were not making money from the units, they may not be able to claim the interest).

Terryw
Discover Home Loans
North Sydney
[email protected]

To learn more about setting up trusts, go to http://www.lawcentral.com.au and register, then go thru the process of designing your own discretionary trust (all for free). If you actually go to the end and pay $275 you will get your trust deed on the spot – via a PDF file. Print it out and take it to the office of state revenue and pay your stamp duty – $0 in QLD, $200 in NSW, and that’s it.

But because there are different types of trusts and different stategies, going and getting some advice may be better in the first instance. It can cost from $1000 to about $2000 to setup a trust thru an accountant.

Tranfering existing properties will incurr stamp duty and require new loans to be taken out as Acey said, but you will also have to pay CGT as it is considered a sale. It may be better leaving as is, and buying all future property in a trust.

But it still may be worth looking at as you could release ‘profits’ which could be used to pay down non deductible debt and then reborrowed again for investments.

find a good accountant.

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi High

It is a good strategy. If you have say, 10 properties, you could increase the LOC on one property per year, so in year 11, you go back to IP one and do again – they would have hopefully more than doubled in this time.

Just don’t go taking too much. Maybe 80% of any growth would do. eg IP valued at $300,000 grew at 10% last year = $30,000 so just take 80% of this = $24,000.

But getting loans without an income is not as easy as you suggest. It would have to be an asset lend which are usually 65% LVR, or you could use a Low Doc at 80% LVR declaring an income, both = higher rates. You wuold probably need multiple banks as they would not be too impressed with this strategy – ie just icnreasing your loans every year without an income comming in from the increase.

Terryw
Discover Home Loans
North Sydney
[email protected]

I agree with Stu. It is best to get a pre approval in writing before even looking for a property.

Terryw
Discover Home Loans
North Sydney
[email protected]

Pisces

You also need to take into account CGT on your small profit.

I think what you have described is actually a re-sale. A flip would be substituting another buyer before going unconditional -saving you $12,500 (in some states anyway). Eitherway it will be hard to make a profit in a falling market unless you can resell or flip quickly. Maybe you need the buyers ready and waiting before you find the property.

Terryw
Discover Home Loans
North Sydney
[email protected]

Lucifer

Why not use a trust with wraps or LOs (I do for both). This adds another layer of protection (your shares in the comany are exposed to creditors) and also allows the income (and capital gains if any) to be distributed at your discretion.

Terryw
Discover Home Loans
North Sydney
[email protected]

Have a look at this site:
http://www.diysuperfund.com.au/

Terryw
Discover Home Loans
North Sydney
[email protected]

Lucifer,

There are many Financial Planners that charge an upfront fee for there services (and rebate any commissions received). I share any office with one, but he has not heard of wraps.

I also know another financial planner who is a property ‘guru’ (ie retired young using property), but he did not know what a wrap was and didn’t think much of the strategy when I explained it to him.

Terryw
Discover Home Loans
North Sydney
[email protected]