You have tO be careful with that strategy as the clawback provisions of the bankruptcy act could apply indefinitely. But I agree that it is an excellent strategy that could be implemented with care

Best thing to do would be to use equity to buy further IPs and to keep your cash an offset account. Once you retire then pay out the loan in the PPOR

Hi Geoff

Bit of bad luck there.

See http://www.austlii.edu.au/au/legis/qld/consol_act/da200193/sch2.html

In QLD duty arises when an agreement to transfer dutiable property is entered into. Schd 2 Duties Act

Ah, yes GST could be applicable too for the first 5 years that the property when the property is sold.

Hi Chris

Yes, certainly get insurance. This should cover many things – but not all. Say a tenant reported some damage and the landlord knew about it but didn't rectify the fault. The insurance may not cover something like this.

There is a nsw case where a tenant punched a class door and did some bad damage to his hand. From memory the tenant was awarded $800k because the landlord didn't use the proper glass that was required in the door. If you want I can list a few cases for you to read.

As for the personal guarantees, these can be reduced by having just one person as the fall guy. and have no or little assets in that person's name. But this would still be strong asset protection if the assets were held in a discretionary trust because if that person where to go bankrupt then the trust assets would generally not be available to creditors.

What title the property is shouldn't affect whether there is gst.

I don't think selling a property so as to buy 'positive cashlow' property is a good idea.

Think about which will give the greatest return. If this one is a dud then it may be best to sell but do the sums first.

It could be that your property will be exempt from CGT because it could be still classed as your main residence. But it could also end up as a loss if it is a dud property. In that case it would be better not to claim the exemption

Not sure when I am going yet. I am staying in Thailand now, and may wait till golden week is over.

You've got to find someone before you can get money from them.

You could employ a private investigator and/or do what you can yourself. Your tenant application may have some leads and then there is facebook etc. If you have their bank details you could get an order to garnish their accounts – if they have money in them. Might be best to watch and wait and let them get back on their feet and then try.

There is a lot <moderator: delete language> out there about asset protection etc.

What you need to consider is what if xx happens and follow through.

eg. What if you set up using a discretionary trust with a company as trustee.

A tenant gets injured and sues the owner – the $2 company has no assets but the assets of the trust could be at risk. Generally the people behing the company are safe. Directors are more at risk, but shareholders of a company can only lose the value of their shares. But if a director of the company knew there was an electrical fault and didn't repair it or take any action then they could be personally at risk. So their personal assets will be available to creditors. If the house is owned jointly then this would be only their share – generally.

So this is a good reason to use a company as trustee and to have one director.

But if you were to set up that structure and then be unable to meet the repayments for whatever reason then the bank will call on the personal guarantee that they would have required at the loan application stage. So if you both give personal guarantees then your personal house would be at risk. If one gave a guarantee then that person's share.

But the bank would sell the property first, probably, and then come after the guarantors for any shortfall. Hopefully this wouldn't be too much, but it can add up with the bank's legal fees.

Now think 20 years ahead. You have set up the above structure an have $10mil in equity and you decide to open a business. You use a company for limited liability reasons which is great, but when you lease a shop the landlord wants a personal guarantee. Your business goes under and the rent for the next 5 years is still owed. You could lose your house over this. But generally assets held in the discretionary trust could be safe from creditors (there are many ways this culd be attacked though).. So allthough one of you may go bankrupt the assets could still be controlled in a trust and you could keep going.