C2

Maybe. It depends if you are going to rent it out and then buy another PPOR. eg if your home is almost paid off and you are going to move out and rent it, and need a loan to buy the new PPOR. You don’t want to be paying tax on the rent while paying undeductible interest on your new home loan.

Terryw
Discover Home Loans
North Sydney
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Why sell? You would have CGT and agents fees and then you would only buy something else with the money again, so more stamp duty etc and you would miss out on any future capital growth. I would probably keep them, increase borrowings every 6 months or so for more investing.

Terryw
Discover Home Loans
North Sydney
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If you are going to be serious about investing, then do it sooner rather than later. It may not be worth transferring existing assets becuase of CGT and stamp duty etc, but any future assets could be held in the trust. Go and talk to a good accountant. It would only cost you about $200 for some advice.

Terryw
Discover Home Loans
North Sydney
[email protected]

Steven

I still can’t get what you are saying and your link provides no clues either. I agree that Trusts are an excellent tool and hold all of my properties in a trust structure. I know that trusts help save tax and so help serviceability in that regard, but I do not beleive having a trust increases your borrowing power because of the guarrantees required.

Are you of a different opinion?

Terryw
Discover Home Loans
North Sydney
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Banks often use the old ‘too rent reliant’ line. The trouble is, it is hard to define when you actually reach this level. Different lenders have different polices, and they don’t really make these policies known.

It basically means the proportion of you income comming from rent is too high compared to other income. The lenders may deem you to be too sensitive to the property market, so any sligh rise in interest rates could get you in trouble. Having positive cashflow property may help to a certain degree, but they can (and do) say you are too rent reliant if all your properties are cashflow +ve.

There are ways around it, such as using several banks, low doc loans, bigger deposits (lower LVRs) etc. But most people will run into this problem sooner or later.

I suggest you have a look at Stuarts article from API magazine for some ideas on finance. It is available from his website if you don’t subscribe.

Terryw
Discover Home Loans
North Sydney
[email protected]

Mel

The gain is just added onto your taxable income. In your example, your income would go to $75,000 and you would pay tax on this amount.

There is a booklet available for download from the ATO webiste or a paper copy can be sent if you call them up.

Terryw
Discover Home Loans
North Sydney
[email protected]

Steven

I am not sure I understand what you are saying. being a beneficiary of a discretion trust or a hybrid trust is no guarrantee of income. It is up to the trustee’s discretion. But since personal guarrantees are involved, you would personally be responsible for the loan. Therefore you must inform future lenders about your guarrantees.

Terryw
Discover Home Loans
North Sydney
[email protected]

Steve

So you are saying that trusts can save you tax. but it makes no difference in serviceability if you borrow through a trust or not because personal guarrantees need to be given. Infact it may even hinder serviceability by using a trust because you, as trustee, would be responsible for the loan, but may not receive any income from the asset as a distribution as the income would go to the benficiaries on the lowest taxable income.

Terryw
Discover Home Loans
North Sydney
[email protected]

use a credit card as deposit, or borrow the 20% deposit from someone, maybe? This could do until you can access that equity in 3 weeks?

Terryw
Discover Home Loans
North Sydney
[email protected]

Luckily cross coll can easily be undone after some growth. Simply apply to your lender for a release of security. for a small fee they will get the property revalued and un cross it (if equity is there of course).

Another disadvantage may be higher LMI premiums. If you are using 2 properties as security, you may have to pay LMI on both-depending on how high your LVR is.

Steven, are you saying that setting up a trust affects serviceability? I have found that it makes no diffence as the lenders require personal guarrantees anyway.

Terryw
Discover Home Loans
North Sydney
[email protected]