Firstly I must say this forum has great place for newbie like myself and it has some great property investment gurus !!
Inspired by Steve’s book 0-130 properties, I am planning to pursue collecting +ve cashflow properties and then at some later stage buy debt free commercial property, to become financially free in 8-10 years time. I am currently 32.
I own a PPOR and house and loan on my name.My family includes myself,spouse and 8 month bub.
My Current financial state is as follows
Before Tax Income = 130K (myself) + 100k (spouse) [permanent jobs]
Loan Balance = 120K
Savings in Offset Account = 50K
Equity = 340K (current value of the property) – 120K (amount owing on its mortgage) = 220K
Need advise on following
1) Setup family trust and company – Since we both are in high tax bracket, I am planning to set up a company and distribute 100% of investment property income to the company as a trust beneficiary. Am I thinking in right direction? Keeping in mind that I have to buy may 8 or 10+ properties to become financially free and would need loan, should I become trustee or setup a 2nd company and make it trustee (I being the director of the company)
2) Deposit Money – Should I use money in offset account or house equity as deposit for my first IP? Adv and Disadvantage of each option? Can I buy IP on trust name using house equity(house is on my name not trust)
3) Location – I am in located in Sydney West. I am aware of advantages of buying regional property but don't have confidence/knowledge on regional areas. Any tip on which regional areas should I focus on? like in NSW lower hunter valley area?
Looking forward for your advise and help.
Trust & Company – get to a property accountant and get the best advise. Not just an accountant. If it were me, I would probably have a trust set up to protect assets more than anything else. Have a company of which you are director, but it is operated by the trust of which you are a beneficiary. As I said, get advise as to what suits your personal circumstances.
Deposit money – Yes can do, but factor in the interest. Basically you are getting a 100% loan split into 2. Does the property make money this way? Always good to have cash to begin, add value to the property, revalue and take the cash back out to do again.
Location – Can't help with regional NSW. Major regional benefits are lower entry level and higher net returns. Downside lower capital growth. I have 2 regional properties – always made cash returns. 2003 purchase is now at 50% capital gain after 9 years.
Ian
Block Head | http://www.theblockblog.com.au
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You have $50k in savings and this is linked as an offset to your PPOR. This is great and keep it there. It is 'bad debt' and you want to pay less interest on the PPOR than on the IP's. Re the equity – you have $152k in equity at an 80% lend. You have $186k in equity at a 90% lend (minus the LMI). The equity of say $152k can be used as a deposit for the purchase of subsequent IP's. Make sure that you keep the $152k separate to the PPOR loan as this portion is tax deductible and you do not want to contaminate the interest that has been charged.
Re location – why are you looking at regional at not western sydney say around the blacktown, penrith and Mount Druitt areas? The other thing with IP strategies is not just location but also what you are planning to do with the property. Some have the strategy of buying cheap fire damaged houses in the area and fixing it up and renting, some subdivide due to the relax council rules in the area and the larger blocks and some ascertain DA for multi dwelling development and sell it with the DA. It all depends on the strategy but make sure you have one before buying.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
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Hiya
welcome aboard.
I wouldn't use the cash in your offset to fund your IP purchases, instead – you could release equity against your PPOR to cover the deposit and purchase costs for each IP. This way, the entire IP debt will be deductible and you get to retain your cash as a contingency fund.
You really need to get a decent accountant and broker on board.
You're starting off from a good base in terms of equity and serviceability (from the info provided) so some careful structuring early on is essential.
cheers
jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Jamie who has responded to you above is very well respected mortgage broker on these forums. Give him a call and get him on board.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Yes i agree i second Jamie as a decent broker and a good lad too and that's often just as important.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
sorry to ask a stupid question but can someone tell me how i can do my 1st post? i have been looking for 20 minutes here and am frustrated
fantomas wrote:sorry to ask a stupid question but can someone tell me how i can do my 1st post? i have been looking for 20 minutes here and am frustratedHiya
Just go to https://www.propertyinvesting.com/forums
Choose the sub forum you'd like to post in.
Press the orange "post new forum topic" button.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
fantomas wrote:sorry to ask a stupid question but can someone tell me how i can do my 1st post? i have been looking for 20 minutes here and am frustratedYou’ve just done it!
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
If you want to start your own thread go to the section you are interested in such as
https://www.propertyinvesting.com/forums/general-property
And then click "post new forum topic".
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
seen it thanks guys and i meant new thread not post cheers anyways.. this site looks friendly
mkbonline wrote:Firstly I must say this forum has great place for newbie like myself and it has some great property investment gurus !!Inspired by Steve’s book 0-130 properties, I am planning to pursue collecting +ve cashflow properties and then at some later stage buy debt free commercial property, to become financially free in 8-10 years time. I am currently 32.
I own a PPOR and house and loan on my name.My family includes myself,spouse and 8 month bub.
My Current financial state is as follows
Before Tax Income = 130K (myself) + 100k (spouse) [permanent jobs]
Loan Balance = 120K
Savings in Offset Account = 50K
Equity = 340K (current value of the property) – 120K (amount owing on its mortgage) = 220K
Need advise on following
1) Setup family trust and company – Since we both are in high tax bracket, I am planning to set up a company and distribute 100% of investment property income to the company as a trust beneficiary. Am I thinking in right direction? Keeping in mind that I have to buy may 8 or 10+ properties to become financially free and would need loan, should I become trustee or setup a 2nd company and make it trustee (I being the director of the company)
2) Deposit Money – Should I use money in offset account or house equity as deposit for my first IP? Adv and Disadvantage of each option? Can I buy IP on trust name using house equity(house is on my name not trust)
3) Location – I am in located in Sydney West. I am aware of advantages of buying regional property but don't have confidence/knowledge on regional areas. Any tip on which regional areas should I focus on? like in NSW lower hunter valley area?
Looking forward for your advise and help.
You need to see a lawyer to set up the structure for asset protection and a tax advisor for the tax side.
1. Using a trust can be a good idea. Factor in non offsetting of losses against personal income and land tax – 1.6% every year in NSW. How you structure the trust is very important for borrowing, asset protection and tax. Who plays which roles is important. Succession on death or incapacity is very important. Same with the company trustee (never have individual unless only buying shares).Using a bucket company is good. But what happens to the money in that company? If it is paid out as a dividend then people on the top tax bracket will end up paying more tax. If it is left in the company can it be lent back to the trust? Need to consider Div 7a need loan agreements in place and charging of interest – will Div 7a even apply?
2. don’t use money in an offset account. You will be wasting tax deductions.
How will you get the money from you to the trust – gift, or loan? What would be the terms of the loan, how is this documented etc are all important.3. Don’t buy inferior regional property with no capital gain prospects.
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
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