Thanks for the tip guys. I will check that site out. Can you tell me one thing, when you borrow to buy these shares do they do a credit check? ie does it go on your craa?

And Steve Mcknight himself said at a seminar in 2001 that shares out perform property. (But you could gear property more, so it worked out better after gearing was taken into account)>

Terryw
[email protected]

Yes, you could borrow against the property. but you couldn’t just borrow against your share. he would have to agree to it and you could get a LOC, for eg, but it would affect his borrowing capacity as he would have to be a guarrantor (as his property is being used as security).

I purchased my first IP with my bother too, and it can get a bit messy when each person wants to do something different. I ended up buying my brother out. If you are going to buy something, you might as well buy his share (no real estate agents commission to worry about).

Or get a LOC (or 2, and have half each). And use that as deposits for you next properties.

Terryw
[email protected]

There are low doc loans availble whereby you just state your income and no checks are made. But you have to be employed. the average lender will not lend on rental income alone. What happens if the house is untenanted?

There are also asset lends where you are not required to state an income at all. These start at around 65% LVR at relatively normal rates (around low 7%s).

There are also non standard lenders that offer asset type lends up to 80% LVR, but the rates are high. starting around 8% upto 70% LVR and then 16% for a second mortgage the next 10% LVR bringing it up to 80%.

You can also get a 90% LVR low doc, but the rates are over 10%!

Terryw
[email protected]

Because they are very hard to sell!

Also anything that has a guarranteed rental income means (in the banks eyes) that this is built into the price.

Terryw
[email protected]

Westan

Losses can aparently be diverted to the unit holder in hybrid trust which effectively means losses can be distributed from a trust.

I’ve only got a discretionary trust so haven’t actually tried this.

Terryw
[email protected]

Give the department of fair trading a quick call. They are fairly helpful, and probably know the NII group by now and what they get up to.

Terryw
[email protected]

Lend it to me!

No, seriously, you could use that money to buy a house for cash. It will have to be a good buy, under market value. Do some minor renos (mow the grass maybe?) and then approach a bank for finance. Tell them you have done the place up and it is now worth $20K more at least. You then may be able to get 100% finance and release your money again. You could then wrap it or keep it as a buy and hold.

Terryw
[email protected]

I just picked up the last copy at Dymocks, North Sydney. Looks good so far. It is a fairly big book at nearly 400 pages.

Terryw
[email protected]

I beleive it can be done, but haven’t done it myself.

Advantages
-Can claim expenses against other income, ie negative gear
-Asset proection
-can also furnish the property, and claim or depreciate almost everything you buy!!!

Disadvantages
-ATO is cracking down?? (I recall something from a few years ago, maybe a tax ruling, about this and unit trusts??)
-You must pay market rent, so with increases the property will become positively geared eventually and the trust will then pay tax on the rent
-You may want to sell down the track, and will have to pay CGT
-There is no land tax exemption for trusts (in most states?)

I wonder what some good accountants would say (like Dale GG). Chris Batten says in one of his books that he generally recommends the PPOR be purchased in individual names.

Terryw
[email protected]

I agree completely with JH.

Don’t know about Dave’s proposal of buying in a trust. On average Aussies move every 5 years or so, so you are likely to decide to move out of your house at some stage in the future. I suppose you could just keep it and rent it out, buy a new one in the trust and re-rent that. But if you sold the CGT could be substantial. Imagine if your $400,000 property doubles to $800,000 in 5 years. Thats a $400,000 CG (or $200,000 after 50% discount) which could result in $100,000 extra tax.

I wonder if you have to charge yourself rent if your home is onwed by a trust.

Also if you keep renting it yourself, it will become positively geared – You must charge yourself market rent. So eventually your trust will be paying tax on your rent.

Acountants such as Chris Batten recommend your home be purchased in your individual names not a trust. He actually recommends 99% ownership in the name of the person less likely to be sued.

In fact, this would be a good new discussion topic. Buying Your PPOR through Trust.

Terryw
[email protected]