Hi all,
I haven’t searched for this, but has anyone given any thought to establishing a CF+ property trust for us time poor (Read lazy…) investors?
With enough initial investors, quite a large deposit base could be created, then commerical and industrial properties focused on for positive cash flow. Rather than all of us doing bits and pieces here and there, why not put together a legitament and listed property trust to really cash in on big deals. (Plus, if you margin into it, you can really double you leverage without any real extra risk.)
Anyone know the legal leverage allowances for property trusts?
Any reasons why we couldn’t set one up?
Cheers
Andrew
Think you will fine most listed property trusts limit themselves to 50% borrowings
Hi Andy,
Would never have thought of it. You have me thinking. Questions .. does it need to be listed at all to attract a multitude of us (me) small time investors? Could say 20-30 investors, create enough leverage to achieve your goal?
I like your big thinking. Now I’m picturing a co-operative virtually buying a town. Imagine a group approaching a council/shire with a take-over bid. Hey, lots of food for thought here. I’m already seeing examples of win-wins for all.
Keep talking mate .. something will come of this. I get the feeling that this is an extension of a previous discussion we had. I like it. Keep the thoughts flowing.
Kind regards, Phil
Hi Phil, Maybe you’re thinking a little toooo small. What about a whole state or even a country? The opportunities are endless?
C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi C2,
You’re right! Perhaps we could also import scabby-mouthed refugee sheep, print our own stamps with a caricature of a Queen from a far off land and call our country new Holland!!
Kind regards in jest,
Phil
Hi Phil, don’t worry post taken in jest.
I think ACTandy’s idea has merit, but don’t know if anyone would actually do it.C2
“Is it true the more you owe the more you grow until the bank steps in?”Peter Span, lecturer, author, guru etc., has done one and it is giving good returns from memory it’s called property fox
If you are going to market tot he public, you will need ASIC approval and must have a prospectus-costly.
Terryw
Discover Home Loans
North Sydney
[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
Hey,
Well you might not be listed straight away, but as a long term goal. I’ve done some research, and you can borrow up to 60% under the reg’s, and if you margin loan into a proeperty trust, you can effectively increase your borrowing by another 60%. Now the current listed trusts all borrow around 30 to 45% so are missing out a bit, but do return 6 to 9.5% in dividends per annum. They seek capital growth a little more aggresively than a CF+ trust would too.
If you got enough people interested, with that goal in mind, it could be quite profitable.
I’ll have a look at property fox.
Cheers
Andrew
Terryw,
Am I correct in assuming your a morgage broker? Would you know what kind of deposit and interest rate you could get to invest purely in property trusts? Would it be compariable to direct property investing? LPT are 40% less variable than shares, so a margin loan just doesn’t seem right.
Appreciate any further advice.
Cheers
Andrew
An interesting idea Andrew!
My wariness creeps in when ideas for new managed funds come late in a boom.
As a BT investor (in a fixed interest fund) I was bombarded with ads to join their new TIME managed share fund a few years ago. TIME stood for Telecommunications Information Media Entertainment, and you know what happened to IT shares in the ‘tech wreck’ shortly afterwards!
Nevertheless I warm to the idea of a high-yield commercial property trust or fund. No doubt they already exist, though I haven’t sought them out.
Even though we’ve had the better part of 10 years of steady economic growth, and I’m in a popular suburb where average house prices are approaching $500k, I still see shops that have been empty for 12 months or more. There’s no way that a house would lay vacant for that long, provided it was half-presentable.
Thus commercial property has higher vacancy risks, may require higher deposits, but have potential for higher returns. Low entry costs and spreading of vacancy risks make it ideal for a managed fund.
This fund would provide income, with some prospect of capital growth. The sort of investors interested would be mainly those who have residential property and want an easy way to go into commercial, and/or those who have their money in fixed-interest or bond-type investments for the income they provide.
Peter
If you read the fin review – tues to thurs for property – you often find property trusts with above 10% p.a.[^]
Hello ACTandy
It’s a good idea.
Pooling resources can be very lucrative, people do it all the time via syndicates to purchase commercial properties in the three to 15 million range. Why go for a listed entity? Then it would behave like the stock market in a fashion, not to mention the costs of setting up etc $$$. The only plus is liquidity.
There is nothing to stop people getting together and forming a unit trust in order to access more expensive properties.Regards
Clive
ACTandy
Yes I am a mortgage broker, but I do not know anything about borrowing to invest in Property trusts. I assume it would be similar to borrowing for shares or a managed fund. The security is the shares themselves, so it would be just like a margin loan. probably a max of around 60% lend.
Terryw
Discover Home Loans
North Sydney
[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
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