Greg

I haven’t looked into these trusts before, can you really get a 12% return?

Terryw
Discover Home Loans
North Sydney
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As a broker, i see a lot of people who get the shits with their bank and then want to change to another, then a week or so later I see someone else who is with the new bank that the client went to, but they have the shits with this bank and want to change to the one the other guy just left!!! Brokers love these people with the shits as it can mean a lot of new loans.

But i think it is true that they good have their good moments and bad moments.

Terryw
Discover Home Loans
North Sydney
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Pelican

I don’t mean to be picky, but a caveat would not help in the event of foreclosure. It would protect the wrappee by not allowing the property to be subsequently mortgaged, but a bank holding a first mortgage would get first shot at selling the property. the wrappee would get the left overs, if any.

Terryw
Discover Home Loans
North Sydney
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I think is it just like renting, but without a lease. It ofen happens when a purchase is involved as long leases want to be avoided. I think possibly, the agent wants her to sign the contract of sale with a long settlement, with her living in the house paying ‘rent’ until the settlement actually happens. If doing this, she should be careful that she can actually obtain the necessary finance.

Terryw
Discover Home Loans
North Sydney
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I agree that it is a good strategy, but one minor point with your example.

If you PPOR is valued at $200,000, then 80% is $160,000 less your current loan of $100,000 = $60,000 in equity available. I am not sure you understood the equity available is 80% less the current loan on that property, as your example had a $63,000 deposit which was more than the available equity.

Terryw
Discover Home Loans
North Sydney
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The trouble with wrapping it is that you will not get the money to do your renos. You may be able to squeeze a small deposit out of the tenant and get extra monthly repayments which will help you, but you won’t get a large lump sum as you would if you sold it.

The credit problems may not be an issue as these only stay on their record for 5 years.

Terryw
Discover Home Loans
North Sydney
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I have not looked into these property trusts, but was intrigued when I read PS’s book. Do these really exist? And can you get margin loans at 70%?

You example looks good, but it looks like you already have a lot of equity to be able to do it.

You probably would not be able to borrow 80% of end value of your project. Maybe you could get 60% at an interest rate of around 12% though.

Terryw
Discover Home Loans
North Sydney
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There are also tax implications. Any money paid into a LOC or homw loan with redraw is considered by the ATO to be a repayment. When you take the money out again it is considered borrowins and the purpose you took the money out for determines whether the interest on this part is deductible or not.

Terryw
Discover Home Loans
North Sydney
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Yes I beleive they wouldn’t have to pay stamp duty on the option, but it may vary from state to state. beside the option fee, the only other cost would be probably legal fees to have a solititor check out the agreements and maybe lodge a caveat.

Terryw
Discover Home Loans
North Sydney
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You can charge for whatever you can get away with, but if it goes to the tribunal then you may be ordered to pay it back.

It may be better to build it into the rent.

Terryw
Discover Home Loans
North Sydney
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