My fav topic! so gonna be a long post:

—Trust—
Swapy has mentioned a few important points so adding on.
1. Having a trust doesn’t sound like it’s gonna solve your problem as such; i would be looking at a better financial structure to lower your PPOR + gearing the tax benefit a lot better ( ie find a better accountant)

-> If you transfer your Ip to the trust, you WILL have to pay the GCT + purchase and mortgage stamp duty ( since it’s a Trust/PTY purchase- however it varies slightly state by state), it’s like selling your IP to a 3rd entity.

-> A standard trust will not receive any of the negative gearing benefit or losses; having said that some trust (depending how your structure it ) can pass the loses to the beneficiaries and still achieve a similar outcome

-> A trust is only useful in 3 common situations;
1. Asset protection- if your going into a risky investment/ financial commitment
2. Your income is in the high tax bracket – trust get’s taxed at 30% straight. + ability to distribute the funds to beneficiaries according to your financials that year ( depending which trust you choose).
3. Can pass on a trust or add kids to the trust in a tax and financial efficient way.

If you want to know more about trust – PM/email TerryW from this forum; his a pro when it comes to trust…i personally have learnt a lot from him.

—Reducing PPOR debt —-

Short term – not the best option….

The quickest option is to sell your IP as you probably know…but selling it to your own trust may not be the best way around this; ie you do a standard sell for $X and make say $200k Profit – CGT kicks in and you after tax profit is $130k ( 35% tax ) goes straight into PPOR. VS

Sell to trust also at an $200k Profit…CGT is the same – so after tax tax profit is $130k ( 35% tax ) – BUT you have to minus cost of 1. Stamp duties around $15k + trust set up cost – $3k, yes in affect these extra funds could be borrowed as an “investment” since it’s soft cost towards the trust…but that’s another investment set up

Long term….

This involves setting up the right loan structure.
1. PPOR set up with Offset account
2. All IP set up as a basic loan on an IO ( interest only – important), with no connecting “accounts”
3. All rent + all income goes into PPOR offset
4. All repayments and bills for PPOR and IP also comes out from this PPOR offset.
5. All tax returns + bonus also goes into PPOR( you get the drift…)
6. Always do a depreciation report.

And if you wanted to be a bit more pedantic and aggressive you could add in step 7. ( a bit of self control)
7. All bills and living expense paid off by a interest free credit card, balance paid off in full before interest is charged ( allowing the extra cash to sit in the offset for 45 days)

—-Capital gain tax- maximize benefit—

This relates back to selling one of the IP to reduce the PPOR debt; this part is important i thought it deserves it’s only section
When you sell, CGT is payable…so how can you within the ATO guidelines minimize this tax? it all comes down to right loan structure, timing and creative strategies

In summary you need to minimize the amount of income receive the year that you sell, not by working less…but by;
1. Doing an IO in advance for 1 year on your IP; so say you do it this year..when it comes to next financial year you will have a improve cashflow and the IP should be +VE gearing…hence more money going towards the PPOR offset.
2. Selling any shares or investment that is making or will make a lost – to offset the CGT
3. Advancing any another investment you might have
4. Fast forwarding any renovations you intend to do on your IP
5. If your work is going to give you any bonus it’s best to speak to the boss amount when you want to receive this…you may instead of getting it now 3rd june…wait till 2st July ( next Financial year)
6. Lastly put off the sale till 1st of july so you got ONE full year to execute the above 5 points…

Ok that’s it for me- sorry there may be some typos…it’s late 2am
Good luck and any questions feel free to holla.

Regards
Michael

For those interested – it’s called a Portfolio Loan

NAB

http://www.nab.com.au/wps/wcm/connect/nab/nab/home/personal_finance/22/2/1/17

ANZ

http://www.anz.com.au/personal/home-loans/compare-home-loan/portfolio/

ANZ one is- they are sub accounts.
NAB one is the same account – so a true offset.

Either way, having the LOC there can cause a lot of tax issues; once you start mixing non table debt with taxable one’s, and then it an get more messy with the offset…
Having the offset is more of a “marketing tool” i reckon.

LOC is only good if it’s ALL investment and no contamination.

Regards
Michael

Hi,

If it’s been on the market for such a long time, it means there is most likely something wrong with the place- and no it doesn’t mean they are keen to sell- it’s more they want to sell and they dont have any another buyer.
Most common problem with commercial deals
1. Lease terms
2. Strata
3. Council or “building managements” limitations or by laws
4. Zoning
5. Business limitations
6. Building /Business type

Dont buy just because the “numbers or rental yeild” adds up…the overall pictures needs to make sense.

Read for a bit more info here- https://www.propertyinvesting.com/forums/getting-technical/finance/4336761

If you purchase price is well under the market the ATO will ask you to pay Stamp duty on the purchase price OR the market price which ever is higher.
You only pay mortgage stamp duty ( different to standard stamp duty) on the $500k part…the $200k private loan is Mortgage stamp duty free.

Lastly i would encourage you to get a pre-approval done with the bank; not one of those 30 min quick pre-approval or 24hr turn around one… those are rubbish as they are “conditional pre-approval” …but instead get a unconditional pre-approval subject to valuation- that way you know IF you can borrow or not and what the limitations are.

Regards
Michael

Sorry no straight answer here….Because LVR is based on property type ( see my previous post) + The business income + your overall financial…if you have strong serviceability and good history bank are willing to take a higher risk and go for a higher LVR etc.

I gotten a Shop front in Parramatta Road Glebe approved at 90% LVR ( self insured policy) …another client who bought something similar on the same road was only able to get 75%.

If your serious about commercial, instead of stabbing in the dark – i suggest you obtain a pre-approval so you know how the bank view YOUR proposal and strength.

Regards
Michael

morpheusbushy – Love your blog, very useful and straight to the point… Good work

Regards
Michael

In term of borrowing; target for an 75% LVR, the lower the better…but no higher then 75.

Regards
Michael

Hi,

This is def NOT worth $39,000.
It all cosmetics renos no structural renos at all.

Unit overall – Good conditions, a paint job will solve most of the problems- Choose a light color to enhance the look and space.
Light fittings –
Kitchen – good condition, the titles aren’t broken…just need a new stove + new cabinets
Bedroom- are fine, paint job

i would:
1. Get painter to start with the painting and hole patching ( this would improve everything and the place is probably rent-able at this stage really)
2. At the same time; get the kitchen done
3. Lay the new carpets
4. Light fittings.

But at the end of the day, if your tight with travel and personal problems, there not much you can do, beside egting agent or your self to organize another quotes for a full job.

Regards
Michael

Hi steve,

I think i know which property your taking about is it the Uni lodge?? Our firm is the main brokering company for that apartment and if your trying to buy that at a 90% LVR then it would be impossible without a bit of equity from your own IP1? or your parents place etc..

Either way any apartment under 40 squ meters would need to be under 80% LVR, the smaller it is the less the LVR needs to be.

About student accommodation:
1. You cant live there ( uni lodge one is fine, as it’s not bound by the management)
2. Strata are higher – because there are more things for strata to maintain…ie shares toilets and kitchen
3. Its hard to sell later on and close to no capital growth

To be honest, there are much better buy out there, that allows good rental yield + better financial leverage at 95% LVR + potential growth.

I would only suggest a student accommodation to a investor who has a few another property under their belt and is looking for a +ve one without “replying” on it too much.

Regards
Michael

homersyd – Welcome to the forum.

The 1st one doesn’t stack up; I been looking at south Sydney for a while because it’s so close to the CBD…but just look at Rockdale and the new apartments – they have gone down in value because it’s over priced, they expected the rent to be similar to the CBD…but were they so wrong!

1. Views of Airport isn’t a seller for me…
2. 4.7% GROSS rental is low…after all expenses are paid with strata – it be around 2.8-3.3% Net return ( depending how much strata is?)
3. If it’s a unit it should give a MIN return of 4.5% NET … because there wont be much capital growth to rely on,

Apartment 2 on the another hand, sounds more promising.

North shore attracts high income earners and working professional = better potential for growth and higher yields.
Now when you say it’s on a highway…is it DIRECTLY on a highway and is access in and out ok for cars? or is there space to work with for the cars

Lastly it be beneficial to post up the address ( or PM/email me if you wish); because every deal is different…there are small pockets within each suburb which are a great buy ( ie lower strata? better st) — i could email you a property report on both properties if you wish.

Regards
Michael