It will be very hard to borrow 100% finance for an investment property. Even harder if the property is located in outside a city area.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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alwayscurious

Another pro: You could rent the house to yourself furnished and then claim decpreciation on your big screen TV etc.

Another Con is Land tax, and you would have to pay your trust market rent, so over time it would become cashflow positive.

It may be a good idea if you only intend to live there for a while, but if you intend the property to be your final residence, then losing the CGT exemption would hurt too much.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Calvin

Yes you are there!

In actual fact, the bank will not lend you money to buy units in the trust. They will only lend to buy property. They will, but they probably don’t realise they will!

The banks just give you a loan, secured by the property. You then simualtaneously buy units, and the trust buys the property. The bank is not actually aware of the finer details. They may not even know the units exist.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Hi Zen

I think with hybrids, some of the income must be distributed to the unit holder. If not, then there is no relationship to the interest being claimed. ie for interest to be claimed, the funds must have been used for income producing purposes. I don’t use hybrids myself, so am not actually sure.

If you own a property as trustee, then this could be used as security for a property you own outside the trust, but only if your trust deed allowed it. You would probably be better off just increasing your trust loan and lending yourself the money, or returing money you lent the trust. If you have a company as trustee, there are various rules about lending money though.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Calvin

You post has confused me a bit!

let me try to explain.

When the trust buys a property, the name on the title is the trustee’s name. If you are the trustee, it is your name. If a company is trustee, it is the company. Its the same whether a hybrid or discretionary trust etc.

With a Hybrid, you then apply to the bank for a loan, but you ask for the loan to be in the unit holder’s name. This may be or may not be the trustee – it depends how you have structure it.

If you, the unit holder, are the trustee, then no problems as everything is in the same name. ie the loan, and the title deed.

If a company is trustee, then this can confuse things a bit. This is where the title will be in the company name. ie the company owns the property as trustee. For the hybrid to work (with the losses being claimed against personal income) the unit holder has to ‘borrow’ the money to buy units in the trust. So the loan needs to be in the unit holder’s name so they can claim the deduction.

Some banks have a problem with the loan being in a different name to the title holder. This will involve third party guarrantees. ie someone not directly involved giving a guarrantee. The unit holder is usually director of the company and will be giving guarrantee’s anyway, so it is not such a major thing – to many banks anyway.

The banks will not necessarily even know about the funds being lent to buy units. To them they are lending funds to buy the property. The buying of the units will be documented in trustee minuites etc. The bank will be happy as they still get the same result, a mortgage over your property.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Apparently the ATO doens’t consider ‘boarders’ paying money to be income. (According to the 2004 Taxpayers guide, and a friend who rang the ATO). You culd possibly declare the income and then claim other expenses such as interest etc, but then you would have CGT problems.

I have had exchange students in my place in Sydney, and charge them $250 per week. This seems to be the going rate in Sydney.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

Have a look at http://www.chrisbatten.com.au
If may be hard to do.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

Are you sure you are doing the right thing? Selling a property will cost you as you know. This is money down the drain. then when you buy again, there is more stamp duty etc to pay.

I am concerned that a number of people are reading Steve’s books and then thinking they have done ‘it’ incorrectly. They sell their property in good locations and then buy inferior property just because it has a higher rental yield.

Think carefully before you rush into anything.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Intro rates are often followed by high deferred establishment fees in the first 5 years or so.

The answer would depend on how long you intend to stay with the lender. And just remember, things change so you may want to move sooner than expected.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]

have a look at http://www.lawcentral.com.au they have an agreement available there for people buying property together. You can register for free and get access to all of the tips.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]