no you don’t

You can restructure but what are you trying to do? Increasing a loan wont necessarily mean more tax deductions.

Cross security is using 2 properties as security for one loan. This can be avoided completely in this situation and you could borrow 105% (ie full price and costs) without crossing and without incurring LMI.

• This reply was modified 10 years, 11 months ago by  Terryw.

I guess you could look at it this way

$400,000 purchase valued at $360,000 with a $30,000 commission

or

$400,000 purchase valued at $410,000 with a $10,000 fee

My answers

1. Yes
2. Run, very fast, away from a club flogging properties – they are probably over priced.
3. stay away from these.

Mr Pham wrote:

Thanks Terryw,

Terryw et al, what are your thoughts on an “Expression of Interest” or “Invitation to deal” letter? Would an “offer” in this form be binding?

Also, putting myself in the Vendors shoes, would you see a verbal offer as serious and genuine as an offer in writing?

Depends on the wording of the content rather than the title of the document. Under contract law an offer once accepted can become a contract. And a contract can be oral. But for a contract relating to land to be binding it has to be in writing – could be an informal back of the envelope type writing, a formal contract is not really needed.

So best to seek legal advice on your document before submitting. It would probably be highly unlikely that some would consider your offer a binding contract, but still a risk.

GoodProbs wrote:

To terryw, I can see that the CG exemption can be a huge benefit but many of the books I’ve read pitch the “never sell” idea as the answer to avoiding capital gains tax on IPs. If we’re not planning to sell anytime soon is there any benefit to be had in putting the property in a trust and claiming the deductions of a normal IP, building a carry-forwardable loss, and allowing distribution of future capital gains? I understand we can do this provided we rent the property from the trust at a commercial rate.)

In my experience there are few people who never sell. A property will change hands eventually, even trusts end in 80 years.Buying in a trust now will mean always subjecct to CGT, even if you live there, land tax in most states and eventually the property will be positive geared so you will be paying tax on something you wouldn’t otherwise. Assuming you do rent from the trust the trust will need other income to offset the loss or there will be no benefit.

Bending the truth is a euphamision for fraud usually. best not to committ a crime if possible.

Depending on the situation it would be best not to use the word ‘development’ anywhere – such as in company names, email addresses etc.
Avoid getting too many properties in your own name – I just had one bank reject a client as a residential lender because the client owned 22 properties. They wanted it to go via their commericial lending.

Don’t put down trust assets on your personal liability statements – as they are not your assets.

Beware of the ownership structure set up. You want to limit personal guarantees. You don’t want spouses involved, where possible. You wouldn’t want to cross collateralise property either. Think that if the development fails what can you lose sort of thing. Use strategies to improve asset protection.

There is a potential way around this by proper structuring and it would involve making a gift to a discretionary trust and then borrowing it back to purchase property in your own name. Dont do this without legal advice though as many issues involved.

I would:

1. Bloody oath
2. Rents go up as do property values. Main residences are generally tax exempt – what other investment can get you this?
3. read 2.
4. Consider borrowing capacity for now and the future. Go For a loan as high as possible, up to 80%. This could be split into an IO loan with offset and a separate LOC for further investments, but this would depend on how much cash you have and the size of the property.