Hi all,
I am 23 and looking at getting started in property investing, mostly developing if all goes to plan. I was just wondering if anyone could give me any ideas on how to set myself up in the terms of getting finance for my projects. Some people have told me to do get finance thru my own name but i have started up my own electrical business just six months ago so it would be difficult for me to to get any decent sort of finance without two years of records. Some other advice i have been given is to start up a separate company with a trust attached and go for it that way but i really have no idea about what steps i would have to go through to start this up and how beneficial this would be for me?
I have no fixed assets at the moment but i have about 130k in the bank ready to go and i don't know if the banks would see this as much of a positive, If anyone could give me any ideas at all that would greatly be appreciated as i don't have much of an idea at the moment.
Thanks,
Cam
Hi Cam,
Thanks for your post. You ask a question that every property investor must considerat some point.
The advantages of buying in your own name are that it is quick, cheap and readily accepted.
The downside though is that you have very little asset protection and are liable to pay the highest amount of income tax if your taxable income is high enough.
In your case, because you are self employed in a high risk field, most accountants would suggest that you hold your investments in a separate entity.
That way, if you are sued professionally, then your personal investment assets will be locked away in another structure an not able to be clawed back by your creditors.
If you were to own the investment property in your own name then it would be up for grabs.
I suggest one of the two courses of action:
1. See an accountant and discuss the pros and cons of setting up a family trust with a corporate trustee. You could then be a director of the Trustee company and also a beneficiary of the Family Trust. An intro meeting will probably cost you between $250 and $500.
OR
2. Grab a copy of WealthGuardian (available at: https://www.propertyinvesting.com/products/products/11) as it explains all your various structuring options in quite some detail and also outlined my investment structure. The cost is currently $339.
Hope this has helped.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks Steve that helps allot, i was at the Martin Ayles development boot camp with you guys it was very inspiring!
So by setting up a trust will the banks look at me differently or because i am the director will they still take into account that i have my own business and i am high risk?
Cam
Hi Cam
Doesnt matter what structure you use with less than 1 years self employment you will not qualify for a traditional loan.
In saying that with the equity you have a straight forward Nodoc loan should be easily achieveable. An alternative is to look at a higher LVR loan and use your BAS returns to demonstrate your income.
Richard Taylor | Australia's leading private lender
Having a company or trust will not change anything from a borrowing point of view. The lender will be looking at you as they will be asking you to guarantee the loan. Trusts are good for other reasons such as asset protection and tax savings, not for borrowings.
But since you have cash, you should qualify for No Doc loans easily.
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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