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Hi,
Are you sure it's my book… can't recall writing one under that title
As a general rule, beneficiaries are usually worded in a generic sense as far as family is concerned (mother, father, cousins, step siblings, sons, daughters, grand children etc), plus you can also nominate specific beneficiaries too (a company, charity etc).
For a more accurate answer you will need to look into the wording of your trust deed.
Cost is usually <$1000 to set up, and less than $750 per annum to maintain (tax return, financials). It will be more if you do a lot of investing or keep poor records.
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
D,
Nice try, but that's not what I am talking about. In your situation you are getting to a 100% leverage situation, and this will be tough to get approval for because when lenders do their due diligence in the post GFC environment, I suspect it will be identified and knocked on the head.
Also, I'm not sure it would work out in the debits and credits in the underlying accounting.
To start off with, in the books of Trust A:
DR Asset (Property) $1m
CR Loan (You for lending in the equity / deposit) $300k
CD Loan (Lender) $700kThis is a cash transaction, so the journal above also indicates the cash outlay and source of funds, namely:
Cash In
Loan (You) $300k
Loan (Lender) $700kCash Out:
Property Purchase $1m
Now let's say you set up Trust B and want to buy another property on the same basis. Assuming you could get a 70% loan from another lender ($700k), where is the other $300k going to come from? While you can 'loan it form Trust A', it won't be a cash transaction because Trust A doesn't have cash to hand over (unless it refinances the property, but how much more will be loaned because it is already at 70% LVR?)
For example,
TRUST A
Dr Loan (You) $300k
Cr Loan (Trust $300k<now Trust A owes Trust B>
TRUST B
Dr Loan Trust A
Cr Loan (You)Overall Cash Position (Trust A &
Cash In
Loan (You) $300k
Loan (Bank Lending To Trust A) $700k
Loan (Bank Lending To Trust $700kCash Out
Property (Trust A) $1m
Property (Trust $1mCash Shortfall: $300k
As you can see, all you are doing is transferring the loan to you from Trust A to Trust B and there is no cash movement. This means that you are still short $300k of physical cash which is needed to buy the second $1m of property (Trust
.As mentioned, you might be able to refinance the property in Trust A (say, up to 80% LVR), but this would only give an extra $100k, you would still need to find another $200k from somewhere else. You couldn't even x-securitize the property in Trust A as it is at max LVR.
Overall then, and as I will outline at the upcoming get together, for this strategy to work you need:
a) A source of cash to provide the 20% deposits that does not rely on refinancing or other debt. In my case this money came from realised profits as I sold property, and from good cash flow businesses
b) You need to be able to demonstrate that you can service the debt.
c) You need a strong asset position
d) You need to source a lender who knows and understands what you are doing.
Terry makes a good point about residential lenders. I deal principally with business bankers who operate with more advanced structures and situations. But business banking is not for the elite… it is open to anyone (or can be if you can write a business plan!).
This has been a technical answer, and sorry if it has put some readers to sleep or frazzled them with accounting, but it sets out the nature of the transaction and the source and use of the cash needed.
Regards,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
$300k
