Banks are conservative.

One way around this would be to pay cash, settle on the property and then immediately refinance.

Terryw
Discover Home Loans
North Sydney
[email protected]

I am not an accountant, but….

eg. Mr X sets up The X Hrbrid trust with X Pty Ltd as Trustee.
A property is purchased by X Pty Ltd as Trustee for X Hybrid Trust.

Mr A then approaches a bank and asks for the loan to be in his personal name, with the loan being securred by the property.

An accounting entry is made to indicate Mr A is buying a number of units in the trust for $xxx.

At tax time, Mr X claims the interest on the loan against his other taxable income.

The trust usually makes a profit (because it is not paying interest). This profit can then be distributed at the trustee’s discretion. I am not sure if all or at least some of the income has to be distributed to the unit holder (to make a relationship between claiming an expense and making an income).

I don’t use a hybrid trust and am not sure that is entirely correct, so please check with an accountant.

Terryw
Discover Home Loans
North Sydney
[email protected]

Lawboy,

Are you mixing up a few things there?

With an instalment contract, the title doesn’t change over until they make the final payment. Wraps (instalment sales) involve the repayment of a loan. Lease Options involved the repayment of rent – usually rent is not refunded if someone moves out.

In the case you cited, I can’t see how this relates to wrapping (or lease options). Someone sold a property at an inflated price, fraudulently obtained a loan with a major bank for their ‘client’ (without their knowledge) and then charged them a large fee secured by a second mortgage stitching them up big time.

Terryw
Discover Home Loans
North Sydney
[email protected]

Yes, it sounds confusing. If a property is costing you money, how does it help you pay off other debt? On the face of it, I can’t see how this could happen in the short term, unless the investment was sold at a profit and the proceeds paid into the home loan.

Terryw
Discover Home Loans
North Sydney
[email protected]

I’ve purchased around 10 properties using buyer’s agents. All were in areas far from where I was living, so could not check on myself. All were good buys, except one.

Terryw
Discover Home Loans
North Sydney
[email protected]

One way to do it maybe to pay cash (using a LOC) and then get the loan. They could then base it on value since you would already own it. Of course, not many people could do this.

I know of one lender that could do it based on valuation – with a max LVR of 70%. But rates would be higher than normal.

And one more point. Are you sure your valuer will reassign the valuation conducted into the lender’s name? If the bank has to re-order the valuation, it is likely the same valuer will revalue much lower -especially if the purchase price is known.

Terryw
Discover Home Loans
North Sydney
[email protected]

Thanks for the detailed summary Michael.

Terryw
Discover Home Loans
North Sydney
[email protected]

Trusts are usually worded very vaguely when it comes to beneficiaries such as: “The trustee and any, past, current or future spouse, children, grandchildren, adopted children, step children, blood relative…” etc.

If you specifically add a named beneficiary, then this may cause a new trust to be formed and that could be treated as a sale or transfer. So you could be up for CGT and stamp duty as if you sold all the trusts assets to another trust.

Terryw
Discover Home Loans
North Sydney
[email protected]

My understanding is:

Costs are deducted from profit (including stamp duty, legals, agents comm etc). This figure is then halved, if you have held the asset for more than 12 months. This fgure is then added to your income, and you pay extra tax accordingly.

Terryw
Discover Home Loans
North Sydney
[email protected]

You probably should take the matter to the Residential Tenacy Tribunal in your state, get a court order for money owed and then you can chase them for the money owing.

Look at the Tenants Union of Tasmania website http://www.tutas.org.au/.

it is for tenants, but probably has lots of good information which you could use.

Terryw
Discover Home Loans
North Sydney
[email protected]