What name do you buy property in, your own or a family trust????

There is no difference in buying in Trust with a Corporate Trustee over buying in your own name as far as borrowing capacity is concerned.

I accept that many Brokers and indeed lenders wont understand a Trust structure and also that many wont offer you the same rate discounts and package benefits however that is not to say they dont exist.

An experienced Mortgage Broker should be able to guide you through the maze and make things clearer to understand.

Just note that setting up multiple Trusts will not increase your capacity to borrow.

" I personally never buy property without using a trust"
Not always true though for 1st PPOR.. get freebies FHOG and stamp duty
the 2nd property onwards… yes definitely through DFT or ??? superfund 

Hi Raewyn5,

We purchased our first IP in a Family Trust with a Corporate Trustee. The main reasons for going down the trust route were to run the portfolio like a business even when overseas, and also for income distribution. We intend to have a large portfolio throughout Australia, so income distribution would eventually become a good problem to have in 15-20 yrs time for us.

I have met others who have questioned that approach, citing additional admin cost in compliance and ASIC charges. We did the spreadsheet modelling and realised that the eventual income from our portfolio will become too unyielding under a 'personal name' model. 

I suggest more research on the number of properties you intend to purchase, your personal drive for wealth accumulation, future plans with the family, etc.

Cheers

Daniel Lee

Hey,

Me and my wife earn a combined income of $40,000/year. We have set up a trust and a company and are currently in final negotiations of buying our first property.

I can’t give you legal financial advise, but here is my personal opinion.

You have to look at your investment strategy and whether trusts fit into that. Basically you buy properties in trusts to protect yourself from your own negligence. I buy older properties and thus will always miss one thing or another when it comes to maintenance.
I have set up a company, who acts as the trustee for my trusts. Each individual property I purchase in an individual trust. This offers maximum asset protection. The company costs $212/year to own and doesn’t lodge a tax return (it is a non trading company), the trusts cost $0/year and I do my own tax returns.

Trusts make lending more difficult, as banks prefer you to buy it in your own name (it makes it easier for them to get their money back if the investment goes bad), but it makes you liable.

Buying in a trust is good as if you do something stupid (like run over someone while drink driving) your properties are protected as you don’t “own” them. You own the company that controls them, so if someone sues you they take ownership of the company. You then set up a new company, boot the old company out of the trustee position and reappoint your new company (as far as I am aware). Always see a qualified account though, don’t take my comment as ‘law’.

I would never purchase property not in a trust because you are making yourself (and all your assets) personally liable to any law suit against you.

@ Pete – I assume you would have to refinance the loan in order to change the personal guarantee of the director

Ryan McLean
http://CashFlowInvestor.com.au
Positive Cashflow Properties Are Just A Click Away
Hope this helped

Thanks Terry,

does this mean i'd have to refinance or would the banks be willing to make the change? especially if the new director was in a better financial positon.

regards

pete

Last thing you would want is to resign and walk away as a Director only to get a call some years later that the Company could not settle its Debts and the Guarantee in favour of the Bank was still valid.

I certainly would be getting the loan refinanced or something clear from the lenders legal department to confirm that your Guarantee was released in full.