just because a property is positive geared doesn’t mean it is a good investment. Banks will base their serviceability calcs with some stress involved – say 7% PI loan for all debts, 80% rents and large living expenses.

You could try different banks, but unless your salary is up very high you will have problems qualifying for finance after a few properties. there are ways to stretch it to a certain extent but it is still very hard these days.

Yes.

The repayments are not income but part payment of capital and part income.

Also it would generally be a breach of the mortgage agreement to onsell a property via an instalment contract without express approval from the mortgagee.

They are basically frowned upon.

The problem you will face is the legal requirement for a lender to make sure any loan to you is not unsuitable. This means they have to consider your ability to repay the loan without undue hardship. Therefore low doc loans are not so low any more. However if you will be purchasing using a company, whether in its own right or as trustee, then this legislation will not apply and it will be easier to get finance. However don’t use a company for this reason only as there are many legal and tax aspects to consider.

Corey Batt wrote:

They’re definitely not non-recourse. If the property market crashed 50% and you went bankrupt, they’ll still come after you for any losses incurred.

Bankruptcy stops them from chasing the debt. If you default on the loan the mortgagee will still take possession of the property, sell it and then chase you for any shortfall and potentially end up bankrupt.

Impossible to answer these sorts of ‘should i’ questions.

It is easy and straight forward to do but have you considered:
1. asset protection – does the company trade?
2. succession
3. land tax
4. income tax
5. capital gains tax
6. structure of the company – who is the director and who are the shareholders.
7. asset protection on shareholder lever
etc

FXD

Sounds like you mean lease doc loans.

A non recourse loan is one where the lender will only take the security property but not chase the purchaser for any shortfall on sale. These exist but are rare.

I don’t do commercial loans so am not up to date, are non-recourse loans even available?

A lender, when applying for further borrowings, will assess you on your income, the rent from the property and the debt you have for this and other loans – with buffers on top.

Perpetual borrowing ability won’t exist as you will either run out of income or serviceability.

Values won’t increase like you expect.

Its pretty straight forward. Have a look at the examples.
Consider example 3 – it may be a way to reduce tax.

I am a lawyer specialising in trusts – if you have any questions ask away

You should get a separate loan. IO if you can redraw from the loan account, if not then a LOC>

If you top up you will have a mixed purpose loan.