Hi Everyone,
I am 24 years old and plan to buy my first property in the next month or so.
I will live in this property for a minimum of 6 months after which time i'll reasess my living arrangments. I plan to renovate this property and ideally i'd like to hold onto it as a rental because i believe there is very good potential for capital growth in the area that i plan to buy in.
One of the main things that i've learnt from Steve is that by investing through Trust structures you can overcome your personal borrowing limit. With this first property i am going to pretty much max out my borrowing capability however i plan to buy in my own name as i want to claim the first home owners grant and my understanding is that you must be a natural person to claim this.
As far as i can see, the best way to go right now is as stated above, buy in my own name, obtain the grant, add value to the property and i will probably have to sell or alternatively wait a while until enough equity has built up to start investing again ( this time through trust strucutres).
I'm happy to go down this path but just wanted to know if anyone has any other suggestions as to how i could proceed? Is there any way that i could invest the first time through a trust and still get the grant? Is there some way that i could structure things so that i will be able to hold onto this first property and still be able to borrow more to continue investing?
Thanks for any suggestions!
Julieanne
Trustees cannot get the grant, nor the CGT exemption.
Using a trust won't help your borrowing capacity unless you can avoid giving the personal guarantee.
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
Julieanne
Steve has subsequently corrected this comment on a number of ocassions
One of the main things that i've learnt from Steve is that by investing through Trust structures you can overcome your personal borrowing limit.As Terry has mentioned buying in Trust will not increase your borrowing capacity these days.
Richard Taylor | Australia's leading private lender
Agree… I am not sure how Steve pulled it out from
damn… ok thanks guys, good to know. Cheers
Yep – read Terry's answer again and you have the 110% correct answer.
CheersThere are good and bad points to consider when using a trust and when the property is held in your name.
I. Your land tax threshold is lower when using a trust. In Victoria the landtax threshould is only $25,000 in a trust but it is $275,000 when in your own name. This will vary from state to state.
2. When using a trust there is no capital gains tax exemption, however you do get a 50% deduction if the property is held for more than 1 year. A property held in your name as your PPOR is not liable for CGT. You can rent the house out for up to 6 years and still claim the PPOR CGT exemption.
3. When using a trust you can split the income between the beneficiarys, to lower the tax paid. You can also split the CGT. If the property is held in your name you cannot do this.
4. If you purchase the property in your name you will be entitled to the FHOG.I was in your position 4 1/2 years ago. I bought my first property in my name and got the grant and I still own that property. My husband and I now own 5 properties. One in his name, one in mine and 3 in trusts.
It is good that you are thinking about your structures now. If I had to do it again I'd do it exactly the same way. Take advantage of the FHOG while it's available. And then go on to invest.
If you intend to only stay in the house for 6 months I'd be inclined to get an interest only loan with redraw or a LOC. That way when you come to rent it out your loan is already set up for investment. You can still make additional payments to bring down the interest and to help to get some equity.
Find yourself a good mortgage broker. They have access to all of the banks and can find you the best deal. They will work with you to find solutions for you. Their services should be free as the banks pay their commissions.
As for your second purchase, don't stress too much about it at this stage. Get our there and get number one done, then worry about the second one.Thanks littleaussie, it is really good to hear that a) You've done this before and b) you'd do it exactly the same way again
I've already chosen a loan and it doesn't have an interest only/LOC option but it has a honey moon rate period of 3 years which makes my repayments lower and probably comparable to those on an interest only loan at a slightly higher rate. I figure that after 4 years (to avoid exit fees) i can refinance to an interest only loan if i want to.
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