Any help appreciated.
My mother in law that would like to sell her residential property to our trust for $50K.
The value of the property is around $250K. It requires much needed renovations (in excess of $30K) before we can get a tenant in for around 200/230pw.
Cash flow is very limited at the moment so we would need to capitilize most if not all of the cost.
Any information on a plan of attack would be much appreciated.
My early projections see a positive cashflow once evertyhing is in place. (tenants,renovations). How do I we get around the cash flow issue??
Just borrow a bit more to cover the costs and the interest repayments plus a buffer. There is plenty of equity in there.
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
Am i missing something here.
Your mother in law is selling her property into Trust for $50K although it is worth $250K.
Do you want to tell us more.
Richard Taylor | Australia's leading private lender
David.
My mother in law only needs $50k. (pay out the bank and some other small debit) and she's not in a position financiallyto borrow against the property and do renovations herself.
She wants the property to go to good use and it's not at the moment. It's un-rentable and empty. Not a good position for an asset to be in.
The mother in law would still be a beneficiary in the trust and the highest income earner would be the trustee so any loans against the property would be serviced by the trustee. (Or the director(s) of the trustee company if one was appionted). Once a tenant is in place (200p/w) the propperty would be cash positive. The intention would be to keep the property in the portfolio cash positive to maintain a high level of security against rate rises and lulls in the market. Very low risk, modest return.
As it's my inlaw, I want to keep well clear of any creditors knocking on the door. If nothing else, the property would be paid off in the same time a at the same rate once the renovations are done. If we get a tenant, a few years earlier and a small passive income to go towards the next deposit.
It's an extemely conservitive approach but one that the mother in law is happy with.
Gav,
as the inlaw is 'disposing of her asset' will she be captured by any asset test for the pension ie adjusting her asset base in order to get/increase a pension?Scott no mates.
No.
She is already receiving an entitlement. The transfer would not increase her payment.
Thanks for the heads up.
Gav H
Gav,
I think you will the value of the asset at the time of the sale will treated as hers rather than mere disposal figure.
Under the Assets Test you are only able to Transfer an asset to a related party where you receive a financial benefit when the valuation of the asset is taken into account and not the amount of consideration.
This stops you selling you property to your son or daughter or Trust to claim a higher pension allowance.
Richard Taylor | Australia's leading private lender
Gav,
I think you will the value of the asset at the time of the sale will treated as hers rather than mere disposal figure.
Under the Assets Test you are only able to Transfer an asset to a related party where you receive a financial benefit when the valuation of the asset is taken into account and not the amount of consideration.
This stops you selling you property to your son or daughter or Trust to claim a higher pension allowance.
Richard Taylor | Australia's leading private lender
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