I think there have been a few posts about this before.

8% yield is not very impressive. Some things to think of:
– possible low capital growth
– hard to finance
– high management fees?
– hard to sell
– hard to add value
etc

Compare this to buying $50,000 worth of share for example.

Terryw
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Probably a good structure would be a unit trust, with each partner holding equal units. The trust should possibly have a company as trustee with all three directors (or one to reduce risk, if others will agree to this).

Because personal assets can be at risk if you get into problems, each person should set up a discretionary trust to hold their units.

You will also need various written agreements in place to determine how the operation will be run, with input amounts etc. Also need to think of what happens if one or more people want out.

Terryw
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You will need to talk to your solicitor about this, mortgage documents will have to be drawn up. You need to decide on the term, the method of their loan (IO, PO, PI or a balloon payment etc), and the interest rate.

I have spoken to a few lenders about this, and they have expressed that they have no problems with it, but I have never see it done with a registered second mortgage (ie the first mortgage holder would have to give their permission for a second mortgage.)

Terryw
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This sort of thing happens all the time. Lenders are very slow when you you want to discharge. They seemt o try and drag things out as long as possible.

Terryw
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Don’t worry about postcodes too much. You can get 95% loans down there on the westcoast for amounts up to $150,000.

Only one mortgage insurer will approve loans down there, and they will generally only approve a few loans per client to reduce their risk.

Even without LMI, you will be able to get 80% loans.

Terryw
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Cruiser

Yes, discretionary trusts cannot distribute losses. Sounds like you should have used a Hybrid Discretionary Trust.

For full doc loans, I can’t think of a lender that will not lend to trusts.

Terryw
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Foundation

It would depend when the letter was written. I am sure Richard was talking about a prior arrangement.

Terryw
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Things to consider:
– look at using a discretionary trust, so income can be attributed to your wife, if and when you require
-Is your wife working? If not how will she get finance? In some situations spouses can go on the loan without being on the title.
-Land tax is progressive. So the more you own, the more % you will have to pay.
– If you get a loan in your wife’s name and you lend her money from your loan, you will need a written loan agreement so she can claim the interest. You may be able to get away without one, but just in case….
– the taxable income would probably be minimal in the first few years, CGT may be a larger problem if you intend to sell later.

Terryw
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If your living at home, and wish to buy a rental property firstly, you will be able to include potential rent as well – boosting how much you can borrow.

Terryw
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Who cares what an agent thinks!

Terryw
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