Hi guys
Just a quick one; I intend to buy my next property in a trust structure which at this time has not been created. The right deal may show up at any time and require a contract to be signed urgently. Would I be right in saying that the trust must exist at the time the contracts are exchanged or else I cannot use the trust as a nominee on settlement?
Thanks,
CarlIt is best to have structures in place first, so this would be better. It would be up to the seller if you can put “and or nominie” on the contract as they need to agree.
Make sure that the trust is settled before settlement of the house, I like it this way.
CATA
Asset Protection Specialist
[email protected]Hi Cata
Some accountants have told me that when you use and/or nominee the nominee must be an entity that existed at the time that you signed the contract. The logic being that you can’t intentionally nominate something that doesn’t exist. But you think this is ok as long as the entity is set up before settlement? That would be more convenient in my situation…
Cheers,
CarlGood question – one that I myself ran past our Mortgage Broker who said NO WAY should you buy as and/or nominee BEFORE your trust structure is in place BECAUSE two of his clients had done exactly this and been burned big time by the ATO and if memory serves me correctly they had to pay double stamp duty because it was deceptive.
I may be foggy on the exact reason BUT I do remember he said absolutely no way to do this – which was good advice because I thought we could do it this way too.It is much better to have structures in place first, but I will answer with a question for you to think about.
If you have a structure in place, then why do you need “and/or nominee” on the contract at all?
Why not just put the entity name on the contract?
CATA
Asset Protection Specialist
[email protected]Thanks for your input bjb007.
Cata, in my situation there would be no need to sign and/or nominee if the trust was in place, unless you just wanted to do that ‘just in case’. Who knows what can happen by settlement…
Cheers guys and thanks again.
Back in ’97 when we were completely unaware we sold our 2nd IP to a “and/or nominee” and got royally done over by the wily next door neighbours. Cost us 16K.
Not that I’d sell any more of our holdings, but if I ever saw another “and/or nominee” from a purchaser I would take great delight in tearing up the offer and throwing it straight into the bin.
My recommendation is the same as Cata’s…get your paperwork together and write up a proper offer.
I guess it’s one of those things, don’t do it unless you’ve got a good reason. Thanks for your input Dazz.
“Back in ’97 when we were completely unaware we sold our 2nd IP to a “and/or nominee” and got royally done over by the wily next door neighbours. Cost us 16K.”
Dazz – how???
Hi
Yes Dazz,
hellman Posted – 01/12/2005 : 18:08:33
Dazz – how???I have recently met a Developer here in sunny Port Hedland who buys exclusively with the “and/or XYZ PTY LTD” and then he puts in brackets (to be incorporated). He does tell the REA that he is going to set up the Pty Ltd once the offer is accepted – no point in spending the $1200 if the offer falls thru.
So far, he is very successful!
Does it really matter? If you sold, as long as you are happy about the end sales price, what’s it matter? You got more or less what you wanted – you can’t keep or don’t want the place! Why “Tear up the contract (or O&A in WA)”? I don’t get it! [blink]
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonReluctant to go through the nitty gritty, but for the benefit of those interested, I’d have to distill a 75 day process ;
1. House put up for sale.
2. Neighbours make an offer directly with agent during first home open. Full price. Their names and address clearly shown on contract. Finance, white ant and building inspection conditions attached.
3. Offer accepted by us. Very happy after the massive amount of work and hours put into the property.
4. Time lapse of 30 days. Under offer sticker on sign. All enquires cease or told “it’s gone” by agent.
5. Offer withdrawn – due to white clause – “walk away clause”. Both we and the REA completely floundering by this stage.
6. We’d just spent 26K and 3 months fully renovating, which they knew, being next door. Not a white ant within cooee of the place.
7. 20 more days pass.
8. Offer received, 16K less than asking price, from a “and/or nominee” from a mystery buyer via a conjuncting agent that our agent had accepted a 60/40 deal without our knowledge.
9. Our agent knew the mystery buyer but decided not to inform us.
10. After much encouragement from the REA, we accepted offer…not happy with the $, especially after the neighbours offer was fresh in our minds, but were sick of the whole deal and wanted out.
11. Nine (9) days before settlement, mystery buyers … nominees … reveal themselves in the settlement documents from the purchasers settlement agent….surprise surprise…lovely people from next door.
12. Flurry of emails and letters to all parties, REA shrugs shoulders and said “At the end of the day you signed it, nothing to do with me”.
13. Property settles and we walk away with 16K less 2 months after we should have settled…but with a whole bunch of lessons under our belt.
I look back and think now about the overall lesson we learnt ;
1. We are the investors. All responsibility / risk and reward rests on our shoulders. Don’t blame REA’s or purchasers or lawyers or friends or anyone else. If you’re not 100% happy and fully understand what’s going on and everything is transparent, don’t sign.
2. The REA has not a jot of influence or power in the legal property transacting process. They are a mere bystander and we do not rely on them at all nowadays.
3. Contract isn’t a solid contract until all of the Mickey Mouse clauses are removed and it’s unconditional cash on the table.
4. Haven’t sold a property since.
Thankfully, these residential debacles are behind us.
Enough, it’s bringing back poor memories.
My 2 Cents,
I guess it depends on what your trust is called ie When a signed contract reads ” THE SMITHS FAMILY TRUST” this probably wont raise the vendors eyebrow’s However if it reads “ABC INVESTMENTS PTY LTD AS TRUSTEE FOR THE RICH MANS TRUST” A vendor would be inclined to not sign and hold out for more. With the mind set that there being ripped off by a pro.Ok before anyone points out the obvious “No one has a trust called this”. IF your trusts has even just one of the following words
-investment
-realestate
-property
-pty ltd
etc
Could cause a vendor to panic and assume that there being fleeced. Even if they are getting a fair price.-Thomas
“More Time To Snowboard”
Carl as a suggestion, consider the name of your trust and how it will affect vendor. Remembering you could end up being asked for more when the vendors greed gland starts secreting.
-Thomas
“More Time To Snowboard”
I’m not making an offer to a private seller, but rather taking part in the process of buying up a number of properties from developers in trouble and hanging on to one myself. A good way to get a decent discount and not have to put much cash into the deal.
The initial contracts will probably be signed and/or nominee by someone else anyway, who will officially onsell to me. The only thing I was confused about is whether or not I can establish the appropriate company/trust structure in the period between signing contracts and settlement.
All things considered I’m tempted to get the trusts organised well in advance now just in case. The temporary savings will not be worth the risk of screwing it up
Dazz,
wow – what a coup. I’m sorry for your loss, but I’d have never thought up such a grand scheme. Talk about shoddy ethicks on that REA!Just goes to show how truely naiive I still am! Thank you for sharing that with us, I – we appreciate it. It is unfortunate that we are learning from your loss, buyer beware!
I guess you are doing your other IPs on your own, Dazz!?
nazzysmith0153 Posted – 01/12/2005 : 23:08:29
“ABC INVESTMENTS PTY LTD AS TRUSTEE FOR THE RICH MANS TRUST”In the example I gave earlier, the Purchaser uses the address for the name of the Pty Ltd (ie: 13 Smith Street Pty Ltd, etc) so it negates that ‘fleecing’ fear some what.
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonOriginally posted by calvin@thirty4:Hi
Yes Dazz,
hellman Posted – 01/12/2005 : 18:08:33
Dazz – how???I have recently met a Developer here in sunny Port Hedland who buys exclusively with the “and/or XYZ PTY LTD” and then he puts in brackets (to be incorporated). He does tell the REA that he is going to set up the Pty Ltd once the offer is accepted – no point in spending the $1200 if the offer falls thru.
So far, he is very successful!
Does it really matter? If you sold, as long as you are happy about the end sales price, what’s it matter? You got more or less what you wanted – you can’t keep or don’t want the place! Why “Tear up the contract (or O&A in WA)”? I don’t get it! [blink]
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonHow does that work Calvin as the XYZ PTY LTD name he chooses may be taken already if not registered? (if you’ve gone through the process of registering a company you know what i mean)
I would prefer to have it set up first before making anoffer, if this guy does a different Pty Ltd for each deal then it wouldn’t matter?
Just trying to understand the logic here..
REDWING“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOriginally posted by carl_vic:
The only thing I was confused about is whether or not I can establish the appropriate company/trust structure in the period between signing contracts and settlement.What time frame are we talking about?
Originally posted by carl_vic:All things considered I’m tempted to get the trusts organised well in advance now just in case. The temporary savings will not be worth the risk of screwing it up
This is the best advice I could have given, but most will wait untill it is to late.
CATA
Asset Protection Specialist
[email protected]I’m not saying that creating your TRrust and Pty Ltd structure first is wrong, in fact it is most likely the way I will go myself!
I merely put out another way that I have just come accross that might work. I haven’t discovered all the ins-and-outs yet, or why this person chooses to go this way, it just seemed very different.TO answer your question, Redwing, yes he does creat a new Pty Ltd for every purchase! Mind you he is a developer, and it seems to suit his urpose! For every development he does he intends on keeping one or two units for himself. So perhaps that is the answer, he sells off most the assets once development is complete and then closes off the Pty Ltd?! Like I said, I haven’t got all the facts as yet. Until I do I’d suggest following Cata’s advice. I appologise if I led any-one astray!
Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonSomething I heard on one of the Wealth Spy CD’s: Even if you have your trusts etc set up, it’s still better to put “[your personal name] and/or nominee” and make out like you’re buying the property for your daughter or something. If the vendor thinks you’re buying it as an investment to “make lots of money” then he’ll be less likely to sell at the price you want – its a psychological thing.
If the price you want is unrealistic then you will not get the price you want anyway. I think most people won’t care as long as they get a price acceptable to them.
CATA
Asset Protection Specialist
[email protected]
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