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Hi
I am a mortgage broker in Sydney and we have a private financier who funds these sorts of deals. He will basically lend on 70% of the end value, subject to the location of the property etc.
If the values come in at $250,000 each, the 70% of this is $525,000. This should be enough to cover the construction costs, and there is meat in there for any extras that may pop up and it may even be possible to capitalise the interest until it is complete.
Rates are high, but not may questions are asked!
AS she has no income, this would not get through a normal lender.
Can you tell me the lcoation? (maybe offlist?).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Melanie
Good point. I have seen some of my clients use unit trusts to purchase property in partnerships and then a discretionary trust holding the units.
I have also heard it suggested that you buy and holds should be kept in a different trust to your wraps. If you are buying and selling more than a few properties in a short period of time, the ATO may class you (or your trust) as a trader and you will lose the CGT discounts. And you don’t want that to happen to your buy and holds,just in case you eventually sell one.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You may want to consider some life insurance and some sort of trauma insurance incase you get incapacitated and can’t work-especially if you are negatively geared.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yes, I have used a buyers agent to do wraps and lease options and has worked well-even after paying their fees. I haven’t got time to find positively geared properties in the outer areas.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
It is also best to keep loans separate for tax purposes. And it easier to refiannce just one of them in future (if necessary).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Just look for an accountant that can provide some good advice to go with the trust deed. Most accounants will just purchase these generic documents off the net. It is the advice that distinguishes them.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You will nearly always have to pass the mortgage insurance criteria if you are borrowing more than 80% of the value. A few exeptions are if you go through a non conforming lender such as Liberty or bluestone (but higher rates).
If pass the banks requirements, then maybe you could borrow the 20% from elsewhere intiailly. wait 6 months and then increase your loan to pay off your loan for the deposit?
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What about stamp duty and mortgage stamp duty!
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Using a trust allows you to distribute any income at your (or the trustee) discretion to any beneficiary of the trust. If you buy in your name only, you are stuck with all the income. Beneficiaries are usually listed vaguely such as any current, future or past spouse, any children or future children, step children and grandchildren. So you may have potential beneficiaries that aren’t even born yet! You never know how your circumstances will change.
eg. Say you were working and your spouse wasn’t. If you had $6000 in positive rental income, you could simply distribute all of this to your spouse and no tax would be payable.
Another major benefit is asset protection. Holding assets in Trust means they are not really yours, so if you are sued, those assets are protected (to a certain degree).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
That sounds reasonable I think. I’ve paid similar.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
There are generally more deductions available to a company or a business than an individual.
For some unusual ones (eg alcohol) see
http://www.gatherumgoss.com/business.htmTerryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You can certainly use the equity.
If you use equity and no actual cash, then the cash on cash return will really be infinity!
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Bruce Whitting.
http://www.mintgroup.com.au/about/profiles.htmTerryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I agree with Golfer. You should be eligible for a low doc loan as you are self employed.
When applying for the centrelink payments you will have to declare your income etc. There are now strict rules regarding companies and trusts, whereby even if you purchase in a company or trust the income will be attributed to you personally if you control the entity (ie are a director, trustee or appointer). So there is no real way to avoid this. for more info check out their web site.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Good strategy, but capitalsing interest on the IP and claiming it is possibly not allowable. The ATO is fighting this in the courts at the moment. Is that what you meant? If you are just paying interest only it should be ok.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Someone asked me for an explanation of the abbreviations in my post. I’ve emailed back teh answer, but I thought I might put them here as well just in case..
LVR means Loan to Value Ratio (eg $100,000 property with a $90,000 loan = 90% lvr)
LMI means Lenders Mortgage Insurance. Banks generally only lend to 80% LVR so if you want a higher LVR, they will request you pay LMI and so teh LMI company has to approve you loan as well as teh bank. There are only 2 LMI companies which makes it hard sometimes.
PMI is the name of one of the mortgage companies. GE is the other.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You can swap loans around, increasing one and decreasing the other for example. But for tax purposes, it is the purpose of the loan that matters.
But Garry wants to have a debt on his IP and no debt on his home for tax purposes. Unfortunately you can’t do that. The ATO will trace the funds and disallow it.
One way you could do it would be to sell the fully paid off flat to your trust, and then borrow money as trustee to buy it (off yourself). That way the funds are legitimate borrowings for investment purpsoes. If you jsut increased you loans the purpose would be non investment so the interest deductions would be disallowed.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Did the bank manager include the potenital rent from the property you will be purchasing? From what I have seen of bank managers, probably not.
You could get a LOC setup to access some of that equity. You could then take the deposit for your new property from this LOC and go to a different lender for the main low. Some people use low doc loans when they can’t service anymore, they go to a different lender and jsut declare their income. No confirmationis done by the low doc lender.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Even if they turn out to be good cashflwo, they may be very hard to onsell.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Just found this on the ATO site, regarding Superfunds lending:
“Loans/financial assistance to members or a member’s relative
Trustees are prohibited from lending money or providing financial assistance from the fund to a member or a member’s relative. The use of a fund asset by a member or a member’s relative for no cost or as a guarantee to secure a personal loan for example would be in contravention of this investment restriction.”http://ato.gov.au/super/content.asp?doc=/content/17585.htm&page=8
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
