Forum Replies Created
Hi Honky
How much are you going to purchase it for? Market Value?
1) You could use you house as collatrol and borrow 100%
2) You could borrow some money agains your house (via a redraw or LOC maybe) and use this as deposit on another loan for the new house.
3) You could get the parents to lend you the deposit, and get a loan loan for the remainder.
4) Often these sort of transactions are done at less than market value and it can be structured so that lenders will basically lend you 100% of your purchase price. Gifting can have social security consqences as well so this may be better than 3.
I think 2 or 4 is preferable. All of these scenarios could be done on either a normal loan, or a low doc loan.
However before you do this, have you considered all family planning and taxation issues? It may be wise to leave it in the parents names. There could be considerable tax advantages to do that. If you become owners and it is your second property there is land tax, captal gains tax, stamp duty on the transfer etc.
If the parents held it until they died it could be passed on CGT and stamp duty free (I think). And your cost base would then be the value of the property at the time. And I think you would have 2 years in which you could sell the property CGT free.
Lots of things to consider so I think it would be worthwhile to speak to a GOOD lawyer (hard to find!).
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
For some ideas check these sites out
Chris Batten Accountant and structuring expert
http://www.chrisbatten.com.auand
Kevin Munro, Solicitors and accountants
http://www.taxlegal.com.au/
Lots of free articles on Trusts etcTerryw
[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
Felicity
What do you mean by
“I’ve been told that because the MI scrutinises the loan very very closely, they insist that guarantors have their credit history marked”For any loan you apply for, your credit record will be marked (exept some private lenders). Even loans in a company name where you act as guarantor.
I know Steve’s technique, but can’t understand how setting up new structures can overcome this. I think that as you get more properties, normal rules don’t apply and banks will treat you as a business.
Now there are only 2 mortgage insurers left which is making it even harder to get multiple loans. PMI and GE are the 2 and they have policies that limit loans to about $600,000 in total. So maybe $1.2 mil all up is possible if your loans or mortgage insured.
BTW most of the low doc loans are mortgage insured no matter what the LVR. Some that aren’t include St George, ANZ, ING and Suncorp.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Spocky
I don’t think this will pose any problems with you claiming all the interest. I do this now (but haven’t been audited-yet).
You and your wife could just lend yourself the money anyway. Just charge yourself the same interest rate as the LOC.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Hi Andrew
If you have an extra $50,000 in cash, why don’t you put it off your home loan and then redraw it again to invest. The itnerest on that portion should then be tax deductible – use a split loan if possible to make it clearly separate. That way you reduce your non deductible debt.
If you can buy +vely geared property the rent from this can also help pay off your home loan quicker.
Terryw
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Sooshie
If the business has gone into administration, then the director or owner will no longer have any control over teh company. An administrator would have been appointed and they are teh ones that make all the decisions from the time of their appointment.
If is was possible to nominate another purchaser, I think the administrator would have to do it. They may agree to do so if it would generate some money for creditors.
But in Victoria it is obly possible to nominate someone without incurring double stamp duty, if you had a written agreement with them prior to the signing of the original contract.
And I beleive that the law has recently chaged and that it may not even be possible to do this any more. ie double stamp duty will be payable.
Terryw
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I was looking at doing this a few years ago and had estimates from $15,000 to $20,000. You may save if there are materials from teh old house you can actually sell.
Terryw
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Jack
I understand that this is not possible, even if you have and/or nominee, without incurring double stamp duty (in NSW anyway). i have done in in Vic, but have heard the laws have changed and it is not possible down there either.
With options I think they have to be stamped by the land titles office to make them a legal document and that stamp duty is payable on this. But not sure how much or how it is calculated.
I have written options in VIc and haven’t had them stamped. I was not concerned with it too much as I was selling it not buying it.
Terryw
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Ken
I think you’ll find more info at http://www.navra.com.au. There is an article somewhere there called ‘cashbonds’.
Terryw
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I was trying to do this in Victoria and had to have another contract drawn up. In the end I never went thru with it.
You also must get finance arranged just in case they don’t settle (for whatever reason) on the same day. If the vendor give a notice to recind, you will only have 14 days to settle, and this is not enought time for a bank to do it.
Terryw
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Hi Jas
The agency has tracked down the tenants mother and she won’t give out his address, but has said he collects mail from there. So the have sent letters asking him to pay etc. Now they have asked me to pay $450 so they can serve a summons on him. This money would be tacked onto the amount he owes me and the would also recover this from him. I didn’t like the idea of doing this and am just waiting to see if he will respond.
Terryw
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Smoke
It depend on when you signed the contract. If it is more than 12 to 18 months ago, then yes you can get a loan based on valuation with a standard bank at standard rates. And this is with LMI approval.
If it is a shorter settlement, then you can still do it, but rates will be higher as we will have to go to smaller lenders or private funds.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Plenty mate. Try units in Campbelltown or Cabramatta. prices start around $140,000. late last year I went to an auction in Maquarie fields -ex housing commisison 3 br house went for $150,000. Aound the blacktown area you can get houses for about $200K still.
Terryw
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D
Watch out for fixed rates. The break costs can be very high. You never know when you may want to refiance to withdraw extra equity or when you may even sell a property.
It looks like Combank is trying to cross collateralise your loans. Maybe a better way would be to withdraw some equity form you land as the LVRs are low. You could then use this as deposit and get a 90 or 95% loan for your IP. This gives you greater flexibility in the future.
Terryw
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Leigh
A good example would be if you had sold a property and had a capital gain. Depending on the size of the gain and the size of your other loans, pre paying hte interest could wipe out paying any tax on the capital gain.
Terryw
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Fullout
Yes you will have to pay stamp duty and CGT on land.
You can try and sell the land you have purchased before settlement, but I don’t know about the deposit. If you are using a real estate agent, you won’t be able to get the new buyers deposit until settlement as it must go into their trust account. I don’t know what happens if you are selling it without an agent.
Terryw
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JellyB
That happens sometimes. Bank (or LMI) is worried about having too many units in the one block. It increases their risk. Maybe there are other units in the block with the same bank as well?
You could just ask for an increase in your loan, take out the extra funds and go to a different bank using those funds as deposit.
That’s a good return too so maybe the bank is only taking a much lower rent into account in the serviceability test.
Terryw
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Polaris
If you go for the cheaper end, you could go very far using your your own money, then getting a large deposit from the wrapee which replaces most of your deposit. You keep saving in the meantime to help you go a bit further.
Mathew, no offence taken. I too have heard that it is not legal to do installment contracts using IO loans. But I don’t know where this idea comes from. My wrap contracts say nothing about it.
Another point, my VIC installment contracts say all of the wrappee’s repayment to me (wraper) must be paid off my loan. ie I am not allowed to pay the minimum and keep the difference. Does anyone know anything about this?
Terryw
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here is another angle on Options.
A client of mine bought a rental property about 2 years ago for $228K. A developer has purchased an option for this property with a strike price of $1mil. Epxiring in one year. He has options on a number of houses in a row, and has submitted DA approvals etc to council for some big units for the site. This developer has aparently already sold the whole lot to another developer and has made about $9mil profit. And he doens’t even own it yet!
Terryw
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I agree with Willi
I do 5 years leases with an option to purchase anytime – the strike price is set at 20% more than market price and this decreases like a PI loan (tho more slowly)(I now think this may be too generous). I get a option fee upfront of $3000 to $4000 and get about 40% more rent than market value. This generates a good +ve cashflow and a capital gain when they cash me out. If they move out, the lose the option fee and I get to keep the house and do it again at higher rates.
So if you want to do a sandwich option you could find someone like me, take an option on their property and then you sell an option at a higher price with higher rent and a higher strike price.
Terryw
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