Having just read Steve McKnight’s 0-130 and 0-260+ properties, I’m curious about his claim that you can take out mortgages to purchase property in a trust/company structure, and then you can leverage your income to guarantee the mortgages and do this multiple times with separate lenders. Or have I misunderstood it?
Is anyone able to explain what he meant by this? Has there been a change in laws or lender policy that no longer allows this?
Thanks
Evan
Hi Evan,
Do check out this link – https://www.propertyinvesting.com/topic/5086923-using-business-income-as-guarantor-to-a-loan/ – where another member asked a similar question. Also, see where Steve also added some words to help.
If you have the older books, you will be missing the “Chapter 9” that I reference. It has to be the updated book to get that chapter re Trusts.
Also, I used Search to look for other posts where Trusts were discussed. This link is quite complex, and it includes some very good input especially from Terryw. Here’s the link first :- https://www.propertyinvesting.com/topic/5068817-home-loan-borrowing-using-trust/#post-5076652
Do look for this part of one of Terry’s replies :-
Some lenders will disregard personal guarantees as long as the borrower is paying their own way and the guarantor is not needed to fund it.
You will find the quote above at this link – https://www.propertyinvesting.com/topic/5068817-home-loan-borrowing-using-trust/page/2/#post-5076654
I found this whole topic was a great learning tool, with both Steve McKnight and Terryw adding very useful information. I hope it helps you too,
Benny
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This reply was modified 2 years, 9 months ago by
Benny. Reason: Adding further links
Thanks Benny. I appreciate the quick response. I’ll give these read and try to get my hands on an updated book.
Cheers,
Evan
Hi Evan,
Steve’s strategy involves using separate trusts or companies to buy properties, with you acting as guarantor. Because each entity is separate, lenders (especially if using different ones) may treat the loans independently — allowing you to borrow multiple times.
That said, lending policies have tightened since those early books. Most lenders now factor in your total exposure, even with guarantees. So while the strategy still has merit, it requires careful structuring and the right mortgage broker to navigate current rules.
Hope that helps!
If a trust ‘gets’ a loan it will be the trustee that borrows. Where there is a company as trustee the company will be the borrower with the directors as guarantors of the loan.
If the directors set up Company B for the next purchase (whether it acts as trustee or not) it will borrow. The debts of Company A are no able to be counted as debts of Company B as they are 2 different legal persons.
But where Individual A has guaranteed the first loan this guarantee could be taken into account, for serviceability purposes. But some lenders will disregard this where Company A and the trust it is trustee of, are ‘self sufficient’.
Seek legal advice on this beforehand as there are many issues.
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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This reply was modified 2 years, 9 months ago by
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