We fully own our PPOR & have 2 IPs. 1st IP is a 2br unit, +ve cashflow in ACT CBD (value $290K, own $50K), 2nd is a townhouse, -ve cashflow in NSW (value > $500K own $425K). Our aim is to create extra income to supplement our super pension later on & help our children to purchase their PPOR. In the current state of economy I don’t think they can afford to buy their own house.
I want to move all of our properties to Trust but still undecide because of the high stamp dudy cost. I’m thinking of selling the 1st IP to free up money for a deposit to buy a house for my eldest child. The left over to buy a cheaper +ve cash flow IP (in another state) for Trust. Future savings & income generated from Trust will be used to purchase a house for my 2nd child & more IP for Trust.. & so on … Another option is to keep the 1st IP & withdraw its equity to service our other requirements.
I don’t know which option is better or there is another better option than the above. Your input will be most appreciated.
[
]Huey
WOW what lucky kids u have!!
i wish my mum and dad would buy me a house!maybe you could sell the 500k property give them each 100k towards a house then buy 3 cheap +ve cash flow properties in the country as well as go on a holiday and enjoy yourself.. i dont know.. up to you!
Hi Huey.
In view of your intentions think about establishing a trust, and buying all future properties in the trust.
Your children can then live in ones you bought for them, renting them from the trust, with all the associated benefits.
One disadvantage is possibly forgoing the FHOG, but there could be a work-around for this.
I don’t see why you would need to sell 1st IP. Can’t you just withdraw enough equity for the next deposit?
Time for a good accountant!
TerryTerence McMahon
HomeWin
FinanceThanks Terry. It seems a good strategy. I will think about it.
Sorry for my bad English Neo. “own $425” = $425K mortgage with the bank. I’m an “over protective mother” but can’t help it. They can pay back the deposit later when they have extra money & only if I need it. You know how I feel when you have your own children. [
]If you want to sell, another option is to sell your property to the trust (trustee). that way you can sell and keep it at the same time. It will save paying agent’s fees and the hassle. Your only going to replace it with another IP anyway. I suppose it depends your expections on growth and rental income.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
VH2000 ” value > $500K own $425K ” how can this be nagative cash flow ? it appears you own most of it.
[
] Sorry, OWE $425K (not own) $425K []If I set up a Trust for my family what type of Trust I should use ? How much does it cost to set up initially & to manage ? [?]
Huey,
different investors need different structures.
Do a search on this site, and the Somersoft forum, for ‘Trusts’. There is a lot of information!
Don’t get hung-up over costs until you know what is suitable for you, though the general fees seem to be around $3,000 to set up and a few hundred a year for accounting. The benefits would outweigh the costs in a short time. (Cheaper than certain notorious get-rich-quick seminars…).
You will definitely need to find a good IP accountant!
TerryTerence McMahon
HomeWin
FinanceAs i understand, the main reason you place something into a trust is for assett protection, eg if you are a professional or at high risk of litigation.
If this property is neg geared, you will loose the personal tax benefit of this and have to pay significant stamp duty to place it into another entity, you would have to think about that carefully.
The other option is to keep the property fully mortgaged, so the bank owns most of it anyway, if you are concerned about litigation.
Selling the first properpty, you will have to pay CGT.
Could you wrap the property to your child?In relation to the trust issues, I have set up a discretionary unit trust for my properties that are negetively geared and still get the personal tax benefits – asset protection not an issue for me, but significant tax advantages with properties being owned by trust – see a good accountant if this type of stucture interests you cause it can be achieved and in some cases can be well worth the stamp duty you have to pay to transfer them to the trust.
Cheers!!
Thanks All,
My main reason to put my +ve geared IPs into a Trust is that I can distribute its income to my 2 children, supporting them through university. I assume as a retiree with no business I don’t need assett protection (?).
A Discretionary Unit Trust seems to be good for -ve geared IPs & it works the same way for +ve geared IPs as a Discretionary Trust. I assume the DUT will cost more to operate. I’ve read some threats about Trust but I’m still very confused.
My 1st IP’s rental income is reasonably good $340 – $360/wk (I think its value is around 280-290K). Its capital gain is so so because it is in the same complex with serviced apartments. Body Corp rate is high because the complex has resource facilities like pool, gym & sauna. Prices of new, newer 2br apartments on the same level in other building around ACT CBD are from 330-380K with the same rental income but lower Body corporate fees as they have no pool, gym .. etc…
I’m still deciding what to do with it. My financial adviser told me to keep it. His point is if it pays for itself why sell! I will talk to my accountant. Both of them didn’t mention anything about trust when I met them.
[]Huey
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] Sorry, OWE $425K (not own) $425K [
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