Hi all
I spent an enlightening day yesterday at the Perth Masterclass and left with my head spinning. Anyway I have a question about structuring after trying to get my head around Steve’s advice yesterday.
Buying in the name of the trustee company makes sense from an asset protection perspective. Steve also implied (i think) that buying in a company allows you as a director to go guarantor for the loan thereby not incurring debt in your own name. As this guarantee is only a contingent liability the banks discount it as a true liability allowing you to guarantee (and therefore borrow) a lot more than if it was in your own name.
My questions:
1. Have i got the right take on this?
2. Surely the bank will need either the company in its own right (or the director as guarantor)to be able to come up with the required deposit and prove servicability? or have i missed something basic?
3. Although Steve gave a list of a multitude of ways to source OPM he implied (again I think) that neither he nor Dave used these having being able to source money from the banks when required (and maybe through their wrap strategy early on in their careers) How did you guys understand that they were able to keep borrowing more money following traditional avenues?Any help and/or clarification appreciated
Cheers
Gary
Hi Gary,
It sounds to me that you do have the right take on it.
In regards to your second question I agree with you but don’t quite understand the question. As far as I understood what Steve said was just that when one of their companies maxed out in regards to how much money the bank would lend to their company they simply started another company and did the same thing again. So it is always the legal entity of the company that gets maxed out and not Steve as an individual. Regarding the personal guarantor role and proving servicability I believe this is not a problem for Steve due to that he only invests in positive cash flow property so even if the first company has maxed out….well this means that Steve’s income would have increased with wathever yield he recieves from all the property that the loans from that bank has bought him. If anything this would significantly improve his personal servicability and thereby enable him to yet again with another bank be a personal guarantor for the next company and its loans. And so on and so on.As far as I can see this also answers your third question but then again that is if I understood it correct. Anyway, Ihope I have not been to unclear and that I have been able to help answering your questions. I would very much enjoy your thoughts on this.
Best regards
jb
When borrowing through a company, directors (and sometimes shareholders) will be required to guarrantee the loan. This will come up on your CRAA nearly always.
If you start a new company, the bank will still want guarrantees, and you will usually be required to inform the bank of other loans you have guarranteed personally as well as all personal debt.
However, there are some lenders whose application forms are worded in such a way that you may not be reqired to inform them of other guarrantees. If that is the case then, you could get “away with it”. But it will still show up as a hit on your CRAA and the lender may ask for an explanation.
Terryw
Discover Home Loans
North Sydney
[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
Hi Gary,
I was also being enlightened at the Masterclass, and yes you do have the right take on what Steve
was saying. As to your second question. No changed
my mind i’m really not sure and I don’t want to give bad info. The third question is pretty easy.To source money through traditional means, starts a bit slower but still gets you the result. If your first loan got you a cashflow positive property, next time you go for a loan you will actually have more income than before. So approval for your next loan won’t be too difficult. The time consuming part is getting the deposit. Then in the future when you have a few properties behind you will find your initial deposit will be less. Hope that answers your question.
Going back to your second question again I recommend ‘WEALTH GUARDIAN’ If you want to know about structuring thats where you will find it. I personally got one myself. Haven’t got through much yet but what I have read has been very good. I am getting lots of aha moments from it.
John and Paula
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