Forum Replies Created
Jaster
It is a fairly simple calculation so i would be doing it myself using a simple Excel spreadsheet.
Just need to bear in mind that post July 1 2010 you now need to be Licensed or an Accredited Rerpresentative of someone who is Licensed to offer such a product.
Richard Taylor | Australia's leading private lender
I am with Banker and very much opposed to such set up's.
4% Commission can be a little light on as i have come across deals with 6% + commission being earned by the marketing firm.
Use an independant Mortgage Broker acting on your behalf rather than assisting the developer offload his stock and then use either a Buyers Agent (if you need someone to locate a property for you) local property manager for the rental and Accountant to do your Tax return.
Richard Taylor | Australia's leading private lender
Yes you are retaining ownership of the individual properties as you would be the Unit holder or Trustee.
Dont know anyone in the Melbourne area but if you require a mortgage broker you merely need one with some experience of investment and Trust structuring.
Richard Taylor | Australia's leading private lender
An only too common scenario.
Regretfully the "Purpose Test" applies and clearly the purpose is to purchase a PPOR so no go there.
An alternative would be to look at selling both properties into a Unit Trust structure and borrow 100% of the purchase price.
Whilst Stamp Duty would be payable on the individual Transfer prices the interest on the residual funds would Tax deductible and the money could be used to purchase your PPOR.Your mortgage broker should be able to assist you in setting up the structure correctly.
Richard Taylor | Australia's leading private lender
Thanks Shane more of review of my last 15 years in Oz.
Richard Taylor | Australia's leading private lender
Hi SNM
a) Is there a restriction as to the type of property that can be bought in a SMSF? eg: block of 3 or 4 villas/townhouses vs strata retail shop vs single dwelling? Yes and No. There is no restiction as to the type of property that can be owned within the fund as long as the Trustees have considered the risk and the acqusition forms part of the overall investment strategy. No being the fund cannot borrow to fund such a project.
b) Is a smsf liable for land tax? Does it benefit from a tax-free threshold for land tax or is it added to my land holdings?
Yes a SMSF is liable for Land Tax and normally would not benefit from any Tax free threshold. May vary from State to State but is payable in Qld on every dollar.c) Can the smsf sell the properties? Yes of course. Remember a SMSF cannot be seen to Trade so would be hard to argue if you did it repeatedly.
d) Can the smsf undertake works/value add? Can the fund borrow to undertake these works?
Again Yes and No. Nothing to stop the fund improving or renovating the property but is unable to borrow full stop. (To clarify a SMSF cannot borrow in it own right)e) Who borrows on behalf of the smsf – do I have to borrow as trustee or can the fund borrow funds? Are the borrowings at a commercial rate or a investors rate (or the best rate that I can negotiate)?
You cannot borrow for such a venture so question is easily answered. In saying that if the fund invested in a Unit Trust and the Trust (with totally unrelated parties) borrowed funds then this is different.f) If I have to borrow on behalf of the fund eg I own 50% & SMSF 50% (fund has applied its funds towards purchase and not borrowed, I have borrowed 100%), is there an optimum way of structuring ownership or only as joint tenants (would tenants in common mean that if I Passed away the property would automatically pass to the SMSF)?
As long as the property was used as security this would be ok. You borrowed using your PPOR for example. Ownership structure is not that simple unfortunately.g) Is there a restriction on how much (%) the fund can borrow? (the investment will be positively geared with minimal borrowings ie < 20%). Yes Nil.
h) Is the fund subject to CGT discount if the asset is sold pre-retirement age?
Yes the concessional rate of CGT for a SMSF is 10%.i) Can the fund appoint a property manager & pay their fees for management? Does the agent have to be a non-related party ie not a beneficiary of the fund eg PTY LTD company? Yes the fund could use a local propery manager to perform the duties of management but would need to be a non related party. Could not be a Trustee of the fund.
j) Can a beneficiary undertake the work & be paid by the fund? (eg if licenced builder is not required for non-residential works)
No.k) Does the fund need to divest of the assets upon the death of one of the beneficiaries if there is insufficient cash to pay out the account? Not sure i understand the question but if you are saying that the Deed allows for a lump sum payment upon the death of one of the Trustees (Maximum 4) then Yes assuming the Fund does not have any other cash assets (this in itself would probably fail the Annual Audit regards to investment practise) the property would need to be sold.
l) Who would be best to set up the smsf – solicitor, accountant or accountant with legal advice or solicitor with finanical advice?
A good Accountant could set up the Deed however think you might need all 3 depending on what you eventually decide to do.Richard Taylor | Australia's leading private lender
I have done an interview with the API magaazine for next months edition about property so might be worth a read.
Any comments about grey hairs wont be tolerated lol.
Richard Taylor | Australia's leading private lender
If you are referring to a Discretionary Family Trust then No you cannot negative gear and any losses a closeted within the Trust.
Remember however that 1 day the property or asset is likely to be positively geared and at this stage the flexibility of income distribution maybe extremely useful.
If however you are thinking about a Unit or Hybrid Trust then Yes you can claim any negative gearing but will find financing a little harder and HDT might well bring about a closer look by the ATO.
Richard Taylor | Australia's leading private lender
Borrowing capacity will vary from lender to lender so some basic information is required to provide further detail.
Richard Taylor | Australia's leading private lender
Without further details this question is almost impossible to answer as every serviceability model is different.
More importantly under the new National Consumer Credit Code it is not a matter of fitting the deal into a lenders serviceability calculator (The Banks dont have to comply until 1 Jan 11 with the code whearas Brokers and non ADI's do from the 1 July) more a matter of investigating the individual expenses and working out is a viable amount he can borrow and a product that is not unsuitable.
Hecs repayment depending on how much this is will not aide his position.
Richard Taylor | Australia's leading private lender
Fredo
oh if only…..Isn't a valuation a valuation regardless if it is for sale, refinance or otherwise
Richard Taylor | Australia's leading private lender
Yes it is possible merely keep the lvr to 80% or less.
Otherwise it is not. Not every lender charges LMI however they charge something similar.
Richard Taylor | Australia's leading private lender
Julieanne
Steve has subsequently corrected this comment on a number of ocassions
One of the main things that i've learnt from Steve is that by investing through Trust structures you can overcome your personal borrowing limit.As Terry has mentioned buying in Trust will not increase your borrowing capacity these days.
Richard Taylor | Australia's leading private lender
Regretfully with effect from July 1 and the inception of the new National Credit Code we are not taking further USA finance application from Australian residents or citizens and this will be limited to our UK clients only.
Richard Taylor | Australia's leading private lender
I think we had all figured it was The Dragon.
Richard Taylor | Australia's leading private lender
Of course other option is it could be one of the Credit Unions and a few of those offset interest on quarterly rests so have to wait to the end of the quarter to gain the benefit.
Unlikely but as Banker menioned we need the lender to advise further.
Richard Taylor | Australia's leading private lender
In short
The loan is an interest only loan and therefore the loan repayments will vary depending on the number of days in the month but the principal debt will stay the same. Interest will only be charged on the $20K rather than the full $100k being interest only.
There is the odd lender that still charges interest on the full debt in this case $100K and then has the interest on the $80K is treated as an advance repayment.
If the loan was P & I then of course it would be different and your calculations would be correct.
Richard Taylor | Australia's leading private lender
Tina
Regretfully your friendly Broker will have little or no sway on a lender at a 95% lvr unless as been mentioned before he or she is an existing client or the deal / clients scores well in Credit scoring.
Most deals can be done someway or other as long as the lenders parametres are met.
Richard Taylor | Australia's leading private lender
All depends on the size of the deal total loan to value, your other assets and ability to service.
If it is a small residential project of say 4 units and less then Yes you would get be able to get upto 80% of land costs and 80% of ongoing construction (with a few parametres). Anything over 4 and you start to get in the domain of the specialised lender.
Interest capitalisation is available but all boils down to the strength of the deal and the overall lvr.
Richard Taylor | Australia's leading private lender
No william is not suggesting that and these loans are not available for any form of property purchase.
In fact the new National Credit Code which comes into effect July 1 will make it harder for people on limited income to be able to borrow as serviceability models tighten and emphasis goes back to being able to afford repayments (like it should be).
Richard Taylor | Australia's leading private lender
