Forum Replies Created
picja1
Can a superfund actually invest where the security is mortgaged? There are also various rules about superfunds doing things where the trustees benefit, so be very careful before doing this, get some good advice.
Terryw
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I agree with Melanie and would like to add there are considerable tax benefits to a trust as well. There is a good book written by an accountant called ‘Trust Magic’, available at:
http://www.gatherumgoss.com/Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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There is a book available written by an Aussie, Andrew Grey:
http://www.creativerealestateinvesting.com.au/The number of properties you can buy depends on many factors including your income, and deposits (or equity), and the price range of the properties.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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There are various products such low doc loans where you have to state your income and no doc or asset lend loans where it is not even asked. You generallly have to be self employed for around 2 years for low docs (get an ABN now!).
Asset lends can be done on the value of the property alone. I know of one product at 85% lvr with a rate of 9.5% (+ hefty upfront fees). Another at 65% at around 7.45%.
There are also private lenders that lend based on valuation only. Rates are higher, but if you can find cheap properties, you may be able to get 100% finance, but it is extremely hard to do, and also hard to convince a valuer to value the property higher than the contract price.
Low doc loans start in the low 6%s at 80% LVR and range up to 10.15% at 90% LVR.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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That sort of information is not publically available (to my knowledge). You can email me the postcode and I will let you know.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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There are currently only 2 mortgage insurers in Australia. GE will cover 4740, but not 4741. PMI will cover anywhere in Australia, but the LVR will depend on the purchase price. Possibly up to 95% if less than $150,000.
BTW the criteria for both GE and PMI has changed as of 01 July this year, and it is now easier to get mortgage insurance approval.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Could you please rephrase that?
Are you saying you want to distribute income to a company (wihtout actually distributing it?), and then teh company loaning the money back to the trust (wihtout actually any money changing hands?). And you don’t want it to show up on the company tax records so the company doesn’t pay tax on it?
I don’t think you can do that (if that is what you are asking?). Any income of a trust that is not distributed, will be taxed at the maximum rate of 48.5% (trustee will pay this on behalf of the trust). So the money will have to be distributed to someone. You can distribute it to the company which can hten loan it back to the trust, but the company will have to pay tax!
I am not an accountant!
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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vik_fam,
I’ve done some loease options and some wraps and I agree that LOs seem less complicated. Here are some comments:
In a wrap if the wrappees die, they can leave ‘their’ property to whomever they want, if they want to move out, they can sell it, or you wraper may even buy it back. They will probably have some equity, depending on how soon they want to leave.In a lease option, they can move out at any time, but the tenants will lose their option fee and all of teh extra rent that would have been credited against their future purchase price. The tenant may also sell their option.
Other reasons why LOs are less complicated include:
-tax (when does a sale occur on a wrap?)
-Disclosure to financiersTerryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Marie
Yes this is common and good to do if you have enough equity. Then if the bank doesn’t give you what they want, just go to antoher bank. Most people like to do it the other way round, make their home debt free-itmakes them feel safer.
BTW did you mean pawn?
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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I have mixed feelings. I agree that his first 2 books really opened my eyes and changed the way that I invested.
What he writes is generally good, even if it is part fiction. But I don’t like him making money by selling overpriced tapesets and courses to the masses. I went to one of his seminars in Sydney (free tickets) and he said he made US$2 per book and at teh time he was selling 200,000 books per year in Japan alone! But it still wasn’t enough, he wants more!!!!
Terryw
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Paul
Hi, I think property is fairly safe. It is very hard to lose money with property (but not imposisble). Since you have a lot of equity, you could do a lot of property investing. But maybe you could buy one and see how you go, if it works buy another etc.
I have done 6 wraps using a real estate agent. I haven’t even seen the proeprties and have made a good passive income and capital gains as well.
There is alos the possibility of doing a jv with someone that renovates property. This may be a bit more risky though.
You could also just use a buyers agent to source a buy and hold and just go for capital gains.
If there is any problems, other people (such as property managers, tradespeople etc) can handle them. I don’t even know how to change a light bulb and am doing all right!
Good luck
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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I’ve done a few wraps, and the quickest that I have been cashed out is 16 months. (this happens when they refinance with a bank-at a cheaper interest rate).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Brizza. That is correct, the bank has to cover themselves if you don’t pay. They can foreclose on you and sell the property, but there is a chance that they won’t be able to get what you paid for it and aslo costs involved, so they give themselves a margin of around 20%. They are willing to take a lower margin, if you pay their insurance for this (lenders mortgage insurance). You can now actually borrow 100% of the price if you are willing to pay 2.6% of the purchase price in mortgage insurance. Then if you don’t pay, the bank can forcelose and anyshort fall is covered by the mortgage insurance. (They will then come after the borrower to try and recover their costs).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Can’t do that in Australia. You can only offset a capital gain against a loss.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Banks generally like you to be employed for at least 6 months. For 95% loans you will have to show genuine savings of at least 3% of the purchase price (if you can get FHOG). There are 100% loans available for owner occupiers, conditions are tougher and include being in same job for at least 12 months.
There are various products available including asset lends where the lender goes purely on the value of the property (up to 85% lvr). No income required. There are also low doc loans at 80% lvr where you just declare your income with no proof (or checking) required. (people have been know to exagerate their incomes!).
If you can keep comming up with 20% deposits, then you can keep getting loans.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Westan
I think that if your trust was set up before you pruchased your properties then it will be ok, but don’tthink you can just assign existing properties to a trust without actually selling them to yourself as trustee for the trust. But I am not a lawyer or accountant so could be wrong. I would like to know though as I have some properties which I could do this to. Did you have any advice on this?
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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Windel and Stu
Let me guess, they wanted to take a charge over the company as well as personal guarrantees? Or was it a Hybrid trust?
Terryw
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I don’t think you can own a property under a business name. it has to be individual names or a company. It is the structure that is important.
Maybe a trust is best for your situation?
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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I personally will never fix again. It makes you trapped to the bank. very hard to sell or to refinance without paying penalties. I know people who had had to m=pay more than $20,000 in penalties from breaking a fixed loan (house sold due to divorce settlment).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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I don’t think it would matter. They would see how many properties you are claiming for and if the claims are within the generally accepted limits then you wouldn’t stick out.
(I have a client who earns more than $100,000 but has a taxable income of almost $0. I have just introduced him to the concept of +ve cashflow properties and he is now very keen and doing his research. He can’t afford anymore -ve geared. as he said to me, if he were to lose his job and all the deductions, he would be stuffed.)
Terryw
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