Thanks Guys for your feedback! Heading up there this weekend to have a look at a few properties but also to get a feel for the area. Carlito

Thanks NHG,

I'll have a look at the website for some info.

Carlito

Thanks Terry!!

Hi Terry,

Thanks for your response.

How is it dealt though when withdrawing funds from the trust when you have gifted the money to it instead or loaning it?

Carlito

Ok so it's not returnable but a loan is,

1. The trust should pay its own loans. If it hasn't got enough cash to do so it could borrow from you, or you could gift. Don't forget you are not the trust and the trust is not you. so you shouldn't be paying from personal to trust etc as this would look like there is not trust in existance.

Like you have mentioned above, I guess you would have to to always transfer funds across to the trust on a montly bases. In many cases the interest repayments are higher then the rental coming in so you would have to make sure the difference is covered each month.  

Carlito

Hi Terry,

So if Im getting charged interest then I should charge the trust the same amount back but If I'm not getting charged interest due to have  the cash then the trust shouldn't either? do you agree?

My aim is to buy property through the trust, so let's say I had the 20% which I lend to the trust and the 80% the trust borrows under the trust name:

1. Do the interest payments from the 80% loan from the trust need to be deducted from the trust bank account or can it come out of my normal trading account each month? I know that the rental payments must go into the trust account and from there you can transfer it out.

2. If the trust loan (80% of the purchase price) was for let's say 100,000 and I made a payment towards it of 50,000 to reduce the loan  to 50,000. Does this mean that what the trust already owed previously has now gone up an extra 50,000 due to reducing the loan for it?

Loan to Trust 10,000 previous
Loan to Trust 60,000 now

Trust property loan down to 50,000 on the books.

You wouldn't charge interest to the trust on the 50,000 which helped reduce the loan?

Sorry about all the questions Terry just getting a better understanding before going ahead.

Thanks

Carlito

Hi Terry,

I was hoping that you would respond – thanks!

So Terry your saying that I should charge the trust interest – but at the same rate which I'm paying so it cancels each other out?

If the money I've given the trust wasn't borrowed then would you still have the trust pay interest back to you? This will then become income to me and the trust will take up the expense?

Thanks

Carlo

Ok Terry I'll look into it

Thanks once again.

Carlito

Thanks Terryw thats makes sence and gives me better understanding.

I'll have to buy you a drink or two!!!

Can I ask you should I set up an family trust before I buy my next IP? I'm not sure if do I or don't need it.

What do you recommend or is this more of a tax issue?

Carlito

Thanks Terryw for your response.

Can I ask why would you put your rent into an offset account instead of putting it directly onto the IP loan? Lets say the IP loan had redraw facility. Any reason for this?

Thanks

Carlito