Hi Troy

I am not an accountant, but can offer a few points.

It may not be a good idea to rent out your home without living in it first. If you live in it first, you could class it as your main residence, rent it out, claim deductions and still be able to sell it CGT free.

1. Mike at http://www.guardianpartners.com.au is the best account that I know of for this sort of thing. Think they have an office out west somewhere – still worth a drive even if far.

2. Lenders have different policies on who they require guarantees from. Some would allow the spouse to guarantee even if not on title or director. Maybe the wife could be a shareholder of the company, if necessary. Maybe you could still service without including her – which may increase your borrowing cap later on.

3. The Trust/Company borrowing capacity is determined by your personal income. Having a brand new trust with no assets is not a problem.

4. If the trust has one property, then your income plus the rental income from that property can be taken into account.

5. There are a few books around on trusts. Probably best to look on the net for articles. eg. http://www.lawcentral.com.au and http://www.taxlawyer.com.au plus http://www.chrisbatten.com.au

The general books are usually too general, the legal books are generally too complex to understand. There is not much in between. One I have is called “Trust Structures Guide 2005”. Don’t know if a new edition is out yet. It is good, but bloody expensive – about $350. Covers most trusts, and a bit on structuring business etc. This is in a few libraries, so you can borrow and save the price (deposit on a small property!)

If you want to look at the legal side of things, try search the uni second hand bookshops. They often have old editions of law textbooks going very cheap.

6. Yes, you have the idea. Directors sometimes go down with the company, so having one director (who owns nothing) will be a good asset protection strategy. It will also limit the amount of personal guarantees too. You don’t want you wife guaranteeing a loan if she doesn’t have to. This creates risk and limits borrowing capacity.

When setting up your deed, you need to be careful. If you name beneificaries, this could create problems with getting loans. Some banks (eg. Bankwest and RAMS) require personal guarantees from every adult named in the deed! Other banks, such as St. George want every adult beneficiary to sign a letter acknowledging the know the trustee is borrowing. This could be a pain if you have named your extended family. So talk with the person that sets it up, and try to keep this in mind.

Terryw
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Crashy, you had me confused. You are using broker to refer to the real estate agent/

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Hi

Don’t think you will find a lender who will lend on end value. Just on the value or the contract price, whichever is lower.

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Hi CP

One way to do it is buy a place, live in it, and then rent it out – as you are going to do. Living in a place is costly, but renting the same place is usually much cheaper. Compare the mortgage on a $400,000 unit with hefty strata fees to renting that unit. Sometimes 50% difference.

But did you know you can still claim the place being rented as your main residence? And this can result in nil CGT if sold? See s118.145 of the ITAA,
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s118.145.html

So you can sort of do what you wanted to do. You can still claim the interest on your home loan, but just not live there. You can then invest the extra money you are saving by paying a lower rent.

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quite safe?

Not necessarily. These sorts of companies lend to people who have problems getting normal finance. It may be secured by property, but things can go wrong and there are shortfalls sometimes.

Does this company have a prospectus?

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You don’t have a contract until it is accepted = exchanged. So putting a time limit on it may speed things up.

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Look at a discretionary trust too – for asset protection and flexibility.

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CT you would have to talk to your lawyer about that.

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Capital growth is what will make you rich. Don’t sacrifice this for a few extra dollars in rent.

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It could take a while.

If they fail to settle, I guess you would issue a statement of claim. You have to go to court, fill out some forms, and have them served. They will be notified to attend court. If they don’t attend, you could get a default judgment. If they do attend, then the court officer will ask if you have settled the matter? If no, they may say go outside and talk about it. If not resolved, then they will list the matter to be heard on a future date. This may be another month later. You will be asked how many witnesses will be called etc. I have sued someone, but it never went this far, so not sure what happens next. I think you turn up on the day, and you present your case, and they present theirs. You may then get a decision = a Judgment.

Even if you are able to get a judgment, then you need to enforce it. They may not pay you, so then you have to take further action including applying for the sheriff to go and seize their goods or garnish their wages etc. You can get them into the court and get them to list their assets too – so you know if they can pay and possibly what you can go for. This is called an examination summons.

If the judgment debt is over a certain amount, I think $2000, you can apply to have them bankrupt. They must respond to the notice of bankruptcy within 28 days. Usually this jolts people into paying.

Costs will depend on how far it goes. Issuing a Statement of liquidated claim costs around $150. But this also depends on how large the debt is. To serve a document can cost from around $20 to $100. You can actually go to court on your own. No real need for a solicitor. Just read up on it, and maybe attend a few beforehand to know the procedure.

And, if you don’t know where they are located, there may be expenses in finding them as if required (sometimes) to serve documents on them. eg. Notice of Bankruptcy has to be served to the actual person.

If they resist, the whole thing could take up to a year – especially if they use delaying tactics. Things usually never get this far, as most would be concerned about rising legal costs and losing and being forced to pay the other parties costs. So many give in and make an offer early on.

What state are you in? This is what happens in NSW, other states may be slightly different.

I would suggest you get a book on contract law (look for stuff in second hand uni bookshops) and look at local court websites etc.

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