I will be buying my first IP. Can someone please recommend what is best, whether to buy in personal name or in trust ? Then, please provide some pros and cons of trust. Tried to read some older discussion thread but are specific to asked probs etc..
if you read steves book, you will find that trusts are explored in detail, they are safer as the bank wont be able to touch you if something goes wrong, and also you will save money in the long run because once you sell the properties you can decide who in your family gets the fund. You do this based on their tax bracket.
i personally have not used trusts and wont be, i feel the purchases i have made are safe and my income is sufficient for multiple interest rate changes and market movements (unless the rental market turns upside down then i am screwed!)
i think you will need to assess your risk profile and how much risk you are comfortable with
shahabr wrote:they are safer as the bank wont be able to touch you if something goes wrongThis is not correct at all. All lenders would require a personal guarantee. So if something goes wrong both the trust property and personal property of the guarantor will be at risk.
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 Terry,
thanks for clearing that up. from memory steve also mentioned your borrowing power is greater,is that true?
Nope, that is not true either. Trusts don't help you borrow more.
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
PropertInvestor wrote:I will be buying my first IP. Can someone please recommend what is best, whether to buy in personal name or in trust ? Then, please provide some pros and cons of trust. Tried to read some older discussion thread but are specific to asked probs etc..There are many advantages to using a trust and a few disadvantages. I think it best to do some research and weigh up the options.
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
Advantages of Trusts
– Asset protection
– Tax benefits (if used properly)Disadvantages
– More difficult to find lending
– Cost to set upI purchase each property in an individual trust with a non-trading company as the trustee of the trust. This offers the ultimate asset protection.
It will likely cost you around $212/year to own a company and $0/year to own a trust. If you go through an accountant you are looking at around $1,200-$1,500 to set up your trust/company.
I would never invest without a trust, especially if I was going to buy multiple properties.
Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just A Click AwayRyan McLean | On Property
http://onproperty.com.au
Email MeOk Terry. Will do. Tried reading some older threads and some of your posting as well on trust but those were confusing to start with. So thought to ask and get some general idea.
Thank you Ryan. That gives good idea to start reading more about trust.
Reading this "There are many advantages to using a trust and a few disadvantages.", "I would never invest without a trust, especially if I was going to buy multiple properties." and I saw somewhere similar thoughts are by Terry as well. So one thing is sure that I willn't buy until I understand trust stuff.
Can I request some good online article/url/site/resource on trust to get good understanding with less reading.
It takes time for the concept of trusts to sink in, so go slow. I am still learning after using and studying about them for 10 years.
try http://www.lawcentral.com.au and http://www.taxlawyer.com.au for info and the book http://www.trustmagic.com.au
The major disadvantages are:
– Losses in a trust are quarantined – ie you cannot use a trust loss to offset your personal income
– No Land tax threshold in NSW.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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