Hi Nick,

Thanks for your feedback and thanks for making your first post… I hope to ‘see’ more off you on the forum…

I think that you make a fantastic offer… anybody in Queensland looking for a wrap lead? Perhaps you’d like to leave your e-mail address in a post too.

To protect people’s privacy / e-mail addresses we have recently taken away the ability for people to e-mail directly.

Regards,

Steve McKnight

Hi,

What I’m going to reveal is the way that I have been able to secure unlimited finance using a relatively simple structuring system.

In fact… I’m doing the notes for it right now!

See you at the seminar!

Bye

Steve McKnight

Hi Felicity!

How are you?

Thanks for your post… let’s see if I can provide some answers…

Buying Property

If all ABC P/L is is a trustee coy for the ABC Family Trust, I’d just buy the property in the name of ABC P/L. The rest is fine to include, but I think that it is generally unnecessary if the Trustee only acts for one trust.

Multiple Families in One Trust

This is generally not a good idea for two reasons:

1. If your trust makes a loss then because you have multiple families in the trust then the complexity of administering the trust increases dramatically.

2. What happens if you have a fall out?

A better option to discuss with your accountant may be a partnership of 2 family trusts… this has its advantages and disadvantages too.

You could buy the property in the partnership name and the profits would wash down 50:50 to the two trusts.

Perhaps you might also consider a unit trust with the units owned by your family trusts if the partnership idea is not appealing. Property purchased in the unit trust and profits shared based on unit holding (50:50) which flow back to your family trust.

Bottom line… seek accounting advice.

Other Agreements

This would be wise. David and I have a partnership agreement. Perhaps also a ‘Heads of Agreement’ that spells out the relationship and the obligations of each party might be wise.

My comment here is that it’s wise to have something documented… not for any good times, but just in case things get ugly.

Hope this has helped.

Bye

Steve McKnight

Hi Chris,

How are you and Louise travelling? Hey – I’d love to know Louise’s thoughts on the big grizzly bear that’s rocking the stock markets at the moment…

Anyway, about the calculator, remember there are many online tools which I have summarised of Property Investing.Com members in the links section of this website.

If you are after a hand held one for on the road, then a good one (although a bit complicated to work) is the Texas Instruments BAII PLUS, which is available at Officeworks for $80. Click on the ‘Officeworks’ link to open up the relevant web page and then the ‘Product Features And Image’ link for more info.

Best regards (as always),

Steve McKnight

Hi Mark,

On my deals I do 80% LVR.

I could go higher but I find my long-term access to funds drops off as lenders feel I am too highly geared.

At the seminar there will be a lender who I understand can do 90%+ LVR on wraps for certain clients.

Be there or miss out!

Bye

Steve McKnight

Hi Felicity,

Congrats! You have managed to completely confuse me with your post []

As far as insurance goes, here are my thoughts:

1. You should insure the property for land and building insurance the second you sign the purchase contract. It’s a bit like getting car insurance before driving out of the car yard.

2. In a wrap you have two choices:

Option A: Have insurance in your name and have your mortgage and your client registered as having an interest in the policy. You pay and then get reimbursed by your client, OR

Option B: Have the insurance in your client’s name and have you and your lender noted as having a registered interest. Your client pays the policy and sends confirmation by way of a certificate of currency to you.

If you go with Option B then make sure any insurance proceeds go to you direct.

Whatever you decide, be very careful to ensure that you find out all the information about your client to ensure they don’t have a horrible past that may allow the insurance company to later claim that they wouldn’t otherwise of insured the property and that you didn’t make a full disclosure.

Some time ago I was working with an insurance broker to develop a wrap specific policy that protected against this risk. Negotiations stalled when they went broke and now I’ve had to start the ball rolling again dealing with someone else.

So much to do, so little time… I’ll report back if I hear any news.

Regards,

Steve McKnight

Hi Gavin,

The item you refer to is the Property Secrets Revealed folder that I created for the Break Free Events presentation.

The offer was $495 for the folder and as part of the package you received a $600 discount off the upcoming Australian Masters of Property Investing event. As you can tell, for someone lucky enough to secure a seat, this was a great offer as you essentially received the product for free.

This was a special joint-venture product that I did for BFE. At this point I have withdrawn the product, but I do plan to release it later in the year with a tapeset based on one-to-one interviews I am completing with a selection of investors who I feel have excellent advice for all property entrepreneurs.

Stay tuned for more information in about October.

Regards

Steve McKnight

Hi Alf,

Something that you wrote caught my eye and I thought it owuld be wise to flesh it out for all community members…

quote:

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I bought a torrens title townhouse in cbd adelaide about 2years ago off the plan. I furnished it so it was utilised as a service apartment this gave me building depreciation of 4% and not 2.5%…

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Having researched this in more detail, here’s what I have found…

The normal building income-producing building write-off is 2.5%, but because you are offering short-term traveller accommodation (ie. serviced apartment), you are allowed a 4% write-off.

Of course, you are not entitled to a bigger deduction over the life of the project, just a quicker deduction (over 25 years rather than 40 years).

Now your furniture is outside of this building writeoff deal – as it is a fixture and fitting and not part of the capital structure. Furniture is usually depreciated in five years or less.

As for your deal…

quote:

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This larger company is offering us a more comprehensive lease that ties the property up for about 20 years 5+5+5+5 at the end of each term they chose whether they want another term (if they do you have to give them the right of the next term). They are responsible for a signifanct part of the outgoings and management of the property. The catch is that you hand over the furniture to them for one dollar if they chose to go another term. There argument is that one has depreciated the furniture so it costs the owner nothing.

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Yeah – seems like a creative deal, to be sure. You need to weigh up the risk vs. reward, but I’d probably go for it depending on the value of your furniture. A couple of questions in the back of my mind though are:

1. Do you have to replace the furniture every 5 years?
2. How good is the reputation of the coy behind the rental guarantee?
3. Are there any restrictions on you selling it?
4. How are rental increases handled?
5. How are the units booked and what is the penalty for vacancies and strategy for attracting clients?
6. What are the management fees?

You could always go 4 out of the 5 years and sell it in the 5th year to somebody else who probably won’t be careful enough to read the fineprint in the lease and it will become their problem.

Having said that – watch out for a company that ties up management of the place but has a relaxed marketing policy about actually renting them, or worse, if they own the majority of units and have a policy of renting theirs out first and leaving yours vacant. It’s been done before by some dodgy folks in Qld!

Bye,

Steve McKnight

Hi Josh,

Thanks for your post [] and congrats on your potential purchase.

Re: your question about the FHOG. I have cut and paste the following text from the State Revenue Office web site…

quote:

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ARE YOU ELIGIBLE?

To be eligible to receive the grant, an applicant and the applicant’s partner must meet certain eligibility criteria.

An applicant or the applicant’s partner must

*be a natural person (not a company);
*be an Australian citizen or a permanent resident;
*not have owned a home before in Australia;
*occupy the home as their principal place of residence within 12 months; (emphasis added)
*not have received the FHOG before; and
*not have entered into a contract to purchase or build a home before 1 July 2000, or not commenced construction as an owner builder prior to that date.

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On this basis I’d imagine that so long as you had the intention of living in the property within 12 months then you’d be OK. Perhaps be careful to only sign a lease with the tenant for less than 12 months from the date of purchase, otherwise it could be construed that you didn’t have the intention of living in it… otherwise why would you have rented it out for >12 months?

As for your property… seems like a good starter property to learn the ropes with. Just be careful on the body corporate fees.

Regards,

Steve McKnight

Hi,

I did some surfing and found the following information that seems to be relevant about title insurance…

Source: http://www.oldrepnatl.com/

quote:

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What is Title Insurance?

Title insurance is an exclusively American invention. Its purpose was well stated in the first advertisement for title insurance back in the late 1800s:

“This company insures the purchaser’s of real estate and mortgages against loss from defective titles, liens, and encumbrances. Through these facilities [the] transfer of real estate and real estate securities can be made more speedily and with greater security than heretobefore.” [circa 1876]

Protecting purchasers against loss is accomplished by the issuance of a title insurance policy, which states that if the status of the title to a parcel of real property is other than as represented, and if the insured suffers a loss as a result of title defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.

Title insurance differs significantly from other forms of insurance. While the functions of most other forms of insurance is risk assumption through the pooling of risks for losses arising out of unforeseen future events (such as death or accidents), the primary purpose of title insurance is to eliminate risks and prevent losses caused by defects in title arising out of events that have happened in the past. To achieve this goal, title insurers perform an extensive search of the public records to determine whether there are any adverse claims to the subject of real estate. Those claims are either eliminated prior to the issuance of a title policy or their existence is excepted from coverage.

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Title insurance is a uniquely American concept and is not needed here in Australia as the process of conveyancing completes the checks that you would otherwise pay the Title company for.

Hope this has helped.

Bye

Steve McKnight