My answers

1. Yes
2. Run, very fast, away from a club flogging properties – they are probably over priced.
3. stay away from these.

Mr Pham wrote:

Thanks Terryw,

Terryw et al, what are your thoughts on an “Expression of Interest” or “Invitation to deal” letter? Would an “offer” in this form be binding?

Also, putting myself in the Vendors shoes, would you see a verbal offer as serious and genuine as an offer in writing?

Depends on the wording of the content rather than the title of the document. Under contract law an offer once accepted can become a contract. And a contract can be oral. But for a contract relating to land to be binding it has to be in writing – could be an informal back of the envelope type writing, a formal contract is not really needed.

So best to seek legal advice on your document before submitting. It would probably be highly unlikely that some would consider your offer a binding contract, but still a risk.

GoodProbs wrote:

To terryw, I can see that the CG exemption can be a huge benefit but many of the books I’ve read pitch the “never sell” idea as the answer to avoiding capital gains tax on IPs. If we’re not planning to sell anytime soon is there any benefit to be had in putting the property in a trust and claiming the deductions of a normal IP, building a carry-forwardable loss, and allowing distribution of future capital gains? I understand we can do this provided we rent the property from the trust at a commercial rate.)

In my experience there are few people who never sell. A property will change hands eventually, even trusts end in 80 years.Buying in a trust now will mean always subjecct to CGT, even if you live there, land tax in most states and eventually the property will be positive geared so you will be paying tax on something you wouldn’t otherwise. Assuming you do rent from the trust the trust will need other income to offset the loss or there will be no benefit.

Bending the truth is a euphamision for fraud usually. best not to committ a crime if possible.

Depending on the situation it would be best not to use the word ‘development’ anywhere – such as in company names, email addresses etc.
Avoid getting too many properties in your own name – I just had one bank reject a client as a residential lender because the client owned 22 properties. They wanted it to go via their commericial lending.

Don’t put down trust assets on your personal liability statements – as they are not your assets.

Beware of the ownership structure set up. You want to limit personal guarantees. You don’t want spouses involved, where possible. You wouldn’t want to cross collateralise property either. Think that if the development fails what can you lose sort of thing. Use strategies to improve asset protection.

There is a potential way around this by proper structuring and it would involve making a gift to a discretionary trust and then borrowing it back to purchase property in your own name. Dont do this without legal advice though as many issues involved.

I would:

1. Bloody oath
2. Rents go up as do property values. Main residences are generally tax exempt – what other investment can get you this?
3. read 2.
4. Consider borrowing capacity for now and the future. Go For a loan as high as possible, up to 80%. This could be split into an IO loan with offset and a separate LOC for further investments, but this would depend on how much cash you have and the size of the property.

A child can earn up to $416 pa and not pay tax. Not much but it all helps.

A beneficiary can be trustee and the trustee can be a beneficiary, but not the sole beneficary as otherwise there would be no trust.

Benefits are broadly

estate pllanning
tax savings
asset protetection

See my book “Trusts and Tax for Property Investors”
download for free at http://www.propertytaxsolutions.com.au/

To set one up you should seek legal and tax advice and have a lawyer draft a deed. For stamp duty purposes trusts are generally set up with cash, just $10 or so, and this is added to later.

You should consider trusts from the first property onwards – not neccessarily using trust to own one but to at least consider it..

Trusts generally don’t help much under the family law side

Might help if you say what state the property is in.

In NSW Purchaser signs first