I’ve just read Steve’s book and how he bought his first property after just a few months trading as a partnership. Has anyone else been able to do this? I have been told repeatedly that I need two year’s financials to purchase through my company structure.
Any experience at this out there? Or brokers that can help with loans through companies?
Thanks,
BrettHi Brett
We purchased our first 20 properties in a newly established Pty Ltd entity although our Bankers did it solely on the Asset base of the 3 Directors and a PG.
We have a couple of lenders who will consider it if you you want to email me details I would be happy to see if we can assist.Cheers Richard
[email protected]There is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
Most banks will lend to a newly created company. They cover themselves by getting personal guarrantees from the directors. Infact, some banks will not lend to a company that is trading as it is too risky (trade related debts etc).
Have you had some advice on this? I wouldn’t be buying in a company name unless it is a corporate trustee. Speak to an accountant (a good 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
Terry/ Richard,
thanks for the feedback. Both comments highlight the things issues I’ve tried to get around.
1. Directors + PG: Not much good as I’m sole director, with all income sourced through the company.
2. The company is technically a trading company. I’m a professional working for my own comapny, basically a sub-contractor.In response to why buy through the company, it’s because I’m accumlating money there by only taking half the earnings as a salary. By doing this i invest with cash that’s only had 30% tax paid rather than 48% tax.
I’m getting finance now, as I’ve just got my second years financials. Further investigation with my mortgage broker has revealed the hold up has likely been the LMI guys rather than the banks themselves.
Thanks,
BrettBrett
What happens if your trading company is sued? Your house will be vulnerable. Why not just set up a trust? The income can then be distributed to your trading company anyway. Plus it gives you more options later on as well.
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
Hey Terry Congrats on the Gold Stars.
500 posts. Geez.
Well done!!
Cheers,
Teylu“Has anything you’ve done, made your life Better?”
(American History X)Thanks Teylu.
Please call me ‘Gold Member’ from now on.[
]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
Ok Gold Member.
Hey Terry do you work in Mortgages?
I just check out your works website.
I might be interested in getting a First Home Buyers loan in the next 8 to 12 months.
Cheers,
Teylu“Has anything you’ve done, made your life Better?”
(American History X)Brett,
Is this what your accountant recommend?
I believe there’s real risks associated with this structure. You never know when you will be liable for damages arising out of your contracting work. When you have a house under the company name, people are much more likely to sue you.
Plus then there’s the CG tax exemption you don’t get.
I believe most actively trading pty ltds aim at holding as little asset as possible. sometimes not even their own plant and machinery – they set up another pty ltd and have the trading company rent the equipment from that other company.
Perhaps your situation merits your option if so please enlighten me.
Quote:taking half the earnings as a salary. By doing this i invest with cash that’s only had 30% tax paid rather than 48% tax.wow terry – thats the first gold member i have seen and ive been around…………
congratulations
Teylu. yes I am a mortgage broker located in North Sydney. Happy to help you when your ready
Well put aussierogue!
Goldmember
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
Aren’t trusts REALLY expensive to set up and maintain?
I thought of this but my accountant said it was not a good idea. I had only expected to ever invest in one or two properties when I had spoken to him and then I read Steve’s book.
Now my aim is higher but at present only own 2 properties (including the one we live in)… well the bank owns pretty much both of them.Mary
A Trsut will cost about $1000 to set up. All you have to pay after that is the tax return which should not be any more complicated than for an individual. Say $100 per year. Well worth it I think.
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
Thanks Terryw
Will talk to accountant about this.Your comments about risk are noted and have been considered. One point to note on the risk side is that a director’s assets are fair game when you are sued anyway.
My own position is such that I don’t feel too exposed. I’m a consultant with good PI insurance. Damages are limited by contract to haveing to re do reports, which would consume time, not assets. I have a good accountant who’s happy with the set-up. The long term objective for the is to stop trading (when there’s enough passive income).
I have opted to go this way for cash flow reasons. I can buy stuff for cash and have ~6 months to finance it how i like before i pay my company tax (which is what paid for the purchase).
Regards,
BrettHi Brett.
Terryw didn’t mention in his reply (this time!) that a company is possibly the worst structure in which to buy appreciating assets. Have a look at Chris Batten’s website http://www.chrisbatten.com.au for some good reading! Also http://www.gatherumgoss.com
For example, income through the company is taxed twice – once at 30% on profits, and then again at the marginal tax rate of those receiving dividends.
General advice on the forums is that one should keep your business separate from your investment structures.
(Note: this is not specific advice for you!)
TerryTerence McMahon
HomeWin
FinanceCongratulation Gold Member!
I just created today a trust it costed me 300 + 200 for stamp duty so all together $500 only.
Cheers
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Amit
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