G’day,
Hoping for some guidance.
I bought a property in Newcastle a few years back and went in jointly with my nephew to help him get into the market.
We have noticed that the joint ownership creates some complications when trying to apply for new loans as many lenders don’t factor in the joint arrangement which impacts negatively on both my serviceability and my nephew’s.
We would like to hold the property but want to know if there is another way to ‘own’ it. For example, would it be better if we owned the property through a company we both control? Could this alleviate some of the serviceability concerns associated with joint ownership?
Also, if someone could explain the process for transferring property ownership from individual/s to a company that would be great!
Cheers
Dan
Changing it to any other form of joint structure will result in the same serviceability issues – which is exactly why most investment savvy brokers advise HEAVILY against it. This just leaves everyone in a situation where no one can really progress further due to the drag from joint ownership.
Transferring to other entities/ownership will be a CGT/stamp duty trigger – it will be costly so you would need good reason to do this.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Agree with Corey – changing ownership can be costly. Speak with a decent accountant and crunch the numbers to see if it’s worth the costs.
Joint ownership with a non-spouse can cause huge headaches for serviceability :-(
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks. So would it not be possible for us to set up some kind of company/trust and do it in a way that would solve our serviceability issues? I don’t have much experience in this area but I ask because a former colleague of mine seemed to always be buying property with his family through a family company/trust. How do these arrangements work?
Many thanks!
No, it will still have the exact same policy issues.
In terms of your colleagues – who knows. They can either have strong incomes, always making purchases together, it may just be their family household and not other extended family etc.
The only way you’re going to improve each sides borrowing position is one party buys out the other, or sell the asset and from this point only buy solely in individual names instead across multiple households.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Yes it is possible to structure a company or a trust so that only one of you will need to give a guarantee.
Although transferring to another entity will result in stamp duty and trigger CGT it can be beneficial – especially if there is a bit of equity that has build up.
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 Daniel and co.
I have had similar thought’s also, and am sure that a trust (or multiple trust) structure was how some investors have 50+ properties.
As I understand it, you can max your burrowing with trust A serving as a guarantor with your income. Then open Trust B and use your income again in with a ‘fresh’ serviceability as the serviceability of Trust B does not take into account Trust A.
Is this somewhat correct?
Hi Kosta
No hate to say not correct at all.
You have to disclose all loans you are providing a Guarantee for these days so this certainly won’t aid you in the servicing stakes.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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