All Topics / Help Needed! / Clarification Needed

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  • Profile photo of saybalebaysaybalebay
    Member
    @saybalebay
    Join Date: 2010
    Post Count: 6

    Hi All,

    Excuse my ignorance here, but I'm just reading Steve McKnights book, chapter "The Truth About Structuring". Quote "I'm afraid that if you've already borrowed in your own name…..then this strategy will be of little use, because any existing debt you have is deducted from your borrowing capacity".

    Is there anything stopping someone from "selling" a property with a mortgage in their own name to a company they set up and become director of, for the purpose of eliminating personal debt and therefore increasing borrowing capacity??

    Can it be done?? Is it wise?? The property in question is already an IP (rented out) and is the only debt.

    Regards,

    Mark.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Mark

    Nothing to stop you doing it but is it wise is a separate issue.

    Considerations would include Stamp Duty, possible CGT, asset protection (assume the Company would be the corporate trustee of a DFT) land Tax, borrowing costs etc etc etc.

    If you are thinking of doing it merely because you believe you can borrow more then i hate to say that is a myth that doesnt fly.
    As  Trustee / Director you have to disclose those debts that you are standing as Guarantor for and it doesnt increase your borrowing capacity (Odd case where there is benefit).

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of saybalebaysaybalebay
    Member
    @saybalebay
    Join Date: 2010
    Post Count: 6

    Thanks Richard,

    So guaranteeing a debt IS the same as having the debt in your own name, contrary to what the book says??

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Yes it is and i think Steve has clarified this point on a couple of ocassions over the years.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of saybalebaysaybalebay
    Member
    @saybalebay
    Join Date: 2010
    Post Count: 6

    Ok thanks mate.

    Mark.

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