aque wrote:

I thought borrowing 104% is not possible. Or it is possible if I use 20% use a security for the loan without triggering LMI?

Of course it is. Borrow 80% from ANZ and 24% from your sister.

Benny’s right – the word “NOT” is missing.

Bobby wrote:

Hi guys, My partner and I are looking at buying a 2 bedroom unit in Brighton, VIC as a PPOR. We plan on living in it for approximately 8 years. We would then like to buy a family home somewhere else while renting out the unit. We wish to hold the unit for life and use it for income. Is the best way to set up the loan by borrowing %80 of the property value as an interest only loan with an offset account. We don’t want to pay off anymore on the loan for future tax deductions we could use when renting the property out in the future. Any extra income we put into the offset account we will redraw to make the future purchase of our next home.

Does this sound like the correct setup? Any advice would be greatly appreciated. Thanks

Good set up, but could be improved.

Borrow 100% like Richard suggests, but I would suggest you consider buying in 1 name only. When you move out sell to the other spouse who will borrow to buy. This could potentially double the deductible portion of the loan and free up cash to pay for the new PPOR. Indirectly you will be borrowing to buy the new PPOR and claiming the interest. There should be no stamp duty or CGT on this either. Just a bit for legals and tax advice. but seek legal advice before doing this as there are many issues – e.g. you spouse as sole owner could die and leave it to the rspca for example

Asset protection is usually associated with protection from potential future creditors. An interest in a discretionary trust is not something that amounts to property so if a beneficiary went bankrupt the creditors won’t generally get access to the property of the trust. Business people are at a significant risk of potential bankruptcy, but non business people can and do go bankrupt too. I have seen a few go down – due to credit cards, court cases about defective cars that they lost, contractual disputes, loan defaults etc.

Also consider asset protection in death. Trust assets do not form part of the estate on death, so don’t pass via a will. If a will is invalid or challenged then generally trust assets are safe (except in NSW potentially).

Depends on many things – as long as it is not income producing, you are not renovating as a business and neither are claiming another residence and you are both living in it as the main residence then it will probably be exempt from CGT.

Kurtuk wrote:

Hi guys,

Where does the line get drawn about whether I go to an accountant or a lawyer?

Cheers

You need advice on tax law. But a registered tax agent can advise on tax law just as a tax lawyer can. A tax agent (often an accountant) would be cheaper generally!

Thanks for the plug PHP, but I am not actually an accountant. I am a director of a registered tax agent company and also a lawyer (and director of a separate incorporated legal practice). Accounting is a separate profession and not all accountants are tax agents and not all tax agents are accountants. Only a tax agent can submitt a tax return for another person and only solcitors or tax agents can give tax advice (maybe financial planners can give tax advice in limited circumstances)

thanks for the feedback. I tried to make it easy to understand. Wait till you read my trust book and asset protection book, I am making these complicated.

Trusts do give land tax advantages, asset protection but not generally borrowing power advantages (indirectly they can).

Asset protection – what are you trying to protect from? If it is creditors then insurance won’t help you for court judgments from breaches of contract, defamation etc. But insurance will help if a tenant is injured on a property you own – in most cases, not all. Not the same at all.

Not sure what you mean about posoitive gearing as this wouldn’t change anything.

hilander

Banks lend money al the time to people with no property, 1 investment property or more. no issues with this.

if ‘your partner buys the property and has you on title’ then you would be buying the property! It may be possible for you to get a building loan, and/or your partner to.

This is no right or wrong way, but just different ways. Whether you should both go on title would depend on a whole range of things you don’t seem to be considering – see my newsletters for some articles on these topics.

Yes, capital gains tax and stamp duty.

However, if it is a transfer related to a breakdown of a marriage/defacto it can be exempt from both. Your friend will inherit any CG with the property so this will be extra tax in the future and should be taken into account.

First get the finance sorted, then seek legal advice.

Freedpm have you got a link? Crazy stuff