I am looking at starting a vendor finance type business and intend to complete 50+ deals in 2006.
What is the best structure for operating such an investment business, to date I was looking at operating under our private company however have never dealt with trusts and am ignorant to their use.
Thanks
You need to speak to some experienced people and use their accountant.
I cannot answer your question – but if you email me I can forward it to some people who do it.
All the best
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Mc
We run our vendor finance business under a trust/corporate trustee structure. If we were starting out now we’d be off to speak with Ed Chan about his Property Trust structure. We saw him speak on this structure at the end of last month and were impressed by what we heard. I have nothing to do with Ed’s business other than to suggest you have a look at his website at:
http:www.chan-naylor.com.auGood luck.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
I am with Paul we transact all of wraps under a similar entity.
Ensure (and i think you are already doing so)that you deal with a good independant broker who is not only experienced with wrap finance but also company structures and trust borrowings.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
We are just starting in wraps however I am concerned that operating under a new entity would restrict out borrowing capacity.
Our existing company has been registered for 5 years and should obtain finance up to 80% LVR.
Is the Ed Chan structure applicable to smaller players or only those at the top of the market ? Is it common accounting knowledge or would I need to use Ed’s firm as my accountant ?
Thanks
We are just starting in wraps however I am concerned that operating under a new entity would restrict out borrowing capacity.
You will need a garantor for the loans, Beat to speak to a broker that understands these structures. Some don’t but those on this forum seem to.
Is the Ed Chan structure applicable to smaller players or only those at the top of the market ?
Talk to Ed, but there are many others who can set structures in place.
Is it common accounting knowledge or would I need to use Ed’s firm as my accountant ?
I don’t know Ed Chan but if you are using one of his “SPECIAL” trusts then I would use him as an accountant as he knows it best. However I believe the only extra advantange of this trust is the land tax issue, and if you are wraping then is this an issue?
I have never wraped but I think land tax would not be an issue as you do not own the property. Could the wrapers answer this for me?
CATA
Asset Protection Specialist
[email protected]McHenrey,
If you can do 50 deals in 1 year you are a legend , great to aim high . I am also lookig at doing some of these deals but my focus is 5 for next year then 10 every year after that. We sould have a chat.
Kind regards Rick
Monopoly, my favourite game
I would structure it in trusts , do 5 or so in each trust, keep adding trusts as needed as you will soon run out of fianace each time you set up a new trust it is a new identity so you can borrow all over again however you will still have to personally go garentor for them.
Also by opening a new trust every 5 propertys you are now asset protecting yourself whitch will be important if you are going to do so many deals.Cheers Rick
Monopoly, my favourite game
Exellent piont Rikky.
Limiting exposure is often overlooked as some think that if they have a single trust then they have protection. As for the 5 deals per trust, this is common but it is also a personal comfort level. Some have $1mill per trust, some have eack house in a seperate trust.
I like your thinking as to 5 per trust for me personally.
CATA
Asset Protection Specialist
[email protected]Could someone explain what a “trust/corporate trustee structure” is. To date I have experience with:
Investing via an individual
Investing via a partnership
Investing via companyI have had no experience with trusts to date and am unclear of what they are exactly and how they differ.
With regards to borrowing capacity I understand an entity that has been registered for less than 2 years is restricted to 60% LVR, which is quite low. However if a new structure is registered every 5 deals then people must be getting beyond this LVR restriction… I hope !!!
Thanks
Hi McHenry
You would be the director of a company. The company is a trustee of a trust and does nothing else. The trust is the entity that holds the asset.
Benifits are
Asset Protection- it will limit your exposers to potential gold diggers. NSW and Qld are the 2nd and 5th most litigated state in the world, per capita.Estate Planning- can eliminate the cost of transfering assets in the event of death.
Tax Planning- income spliting can be of use, to keep the tax as low as possible. Even under 30% in most cases.
Hope this helps
CATA
Asset Protection Specialist
[email protected]Thanks for the clarification, now just to confirm, I understand I could do the following:
I have a company which has been inoperation for 5 years with ABN etc.
This company would be the trustee of one or more trusts that hold the assets. I would have 5 assets per trust and simply register a new trust every time.
The borrowings would be in the name of the trust and the asset would be owned by the trust.
When a low doc loan requires ABN reg for over 2 years to obtain an 80% LVR then is it the ABN of the trust or the trustee that matters ?
With regards to income splitting who can the income be shared between ?
Directors of the trustee, adhoc individuals or is there a set list of those that can benefit ?
Thanks
CATA may clarify this, but we have a similar structure and always use the ABN of the TRUST not the trustee company.
The reason is that the company is acting for the trust not itself!
should bank accounts also be in the trust name??
We buy properties in Adelaide. Immediate Cash Settlements, No Agent Fees.
[email protected]
phone 0412 437 582Dr,
So it you are using the ABN of the trust, and you use multiple trusts, registering new ones as you go then surely this would limit your borrowings as the trust will have been registered less than 2 years and not qualify for a low doc 80%LVR loan.
Henry
Good point,
look these things confuse me as much as everyone else, I’m no expert. Our accountant rang and said to display our trust abn on all paperwork so we do!
Now, ours is a quick cash business, we dont hold any properties in that trust, may have something to do with the advice we were given????
It’s good to get ideas from these forums, but you need advice specific to your own circumstances!
All the best!
We buy properties in Adelaide. Immediate Cash Settlements, No Agent Fees.
[email protected]
phone 0412 437 582The trust must do all of the trading if you want asset portection.
As for the loans you will have to speak to a mortgage broker for that one as I am not in the know about that one.
CATA
Asset Protection Specialist
[email protected]Henry
It is as we discussed by email.
80% max LVR on a Company lodoc which has been established for 2 years or more. 70% otherwise.
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Sorry to labour the point but I want to ensure I understand the setup & implications.
To use a trust which has the company as a trsutee we would be limited to 70% LVR as the trusts would be registered as required.
Yes
Cheers Richard
Ph: 07 3720 1888
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Surely being restricted to 70% LVR is a significant limitation for those performing wraps under this structure.
For me this limitation makes the corporate trustess structure unworkable as cashflow will require 80% LVRs.
Thanks
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