Hi,
I have just finished Steve McKnight’s Master class and Wealth Guardian and also have spent countless hours reading through these forums.I’m in the process of putting all this theoretical knowledge into action and have a few questions so thanks in advance to anyone who spends the time to respond.
Situation
Married with 1 child living with In-laws, aiming at purchasing first PPOR in January 07. Will rent out PPOR for the first 11 months whilst living with in-laws and saving deposit in that time for first IP. Combined income of 135K. I also have Buyer Beware and Investment detective which I’ll be utilising to purchase property.
Goal
Setup suitable structure to allow a portfolio of 6 – 10 Investment properties offering good levels of tax minimisation along with asset protection. PPOR in wife’s name and Company/trust structure to hold IP’s with me as Sole director of company and family members as beneficiaries
After reading Steve McKnight’s resources I’m quite clued up on the basics however have a few questions that was hoping to get good insight before I approach an accountant. I also understand that most of my questions could be answered clearly by a sound accountant clued up on IP structuring however I like to do my due diligence in structuring before I engage in their services and trust them!! I also realise it’s a lot of information I’m requesting and if anyone could point me in the direction of a resource that answers any or all I would be grateful. Here goes anyway.
1. Could anyone give me details of an accountant in the Parramatta, Merrylands, Smithfield or surrounding suburbs area that is clued up on property investing matters?
2. If I put the PPOR in wife’s name and me as the only Director of the company acting as trustee of our trust (in the effort to protect our PPOR) Does this hinder our IP lending capacity in terms of only having one director that can go guarantor?
3. How is lending capacity derived in a trust/company structure with a sole director with an income of 80K and a empty trust.
4. how is the above trust effected in terms of lending capacity when it has say a 250K property and is in the process of purchasing a second property say to the value of 200K?
5. Wealth Guardian is a basic resource. Can anyone recommend any other resource that will go further into trusts/company setups and focuses on property investment structures and outcomes similar to the questions I’m asking?
6. 2 directors in the company trust structure with combined director income of 135k will raise our lending capacity? will put PPOR at risk as it’s in one of the directors name?
Thanks for any feedback/recommended resources or advise. I will be seeking the advice of an accountant once I’ve done my Structuring Due diligence and found an accountant in my area that’s savvy with all this !!
Cheers
Troy & Diane
Hi Troy
I am not an accountant, but can offer a few points.
It may not be a good idea to rent out your home without living in it first. If you live in it first, you could class it as your main residence, rent it out, claim deductions and still be able to sell it CGT free.
1. Mike at http://www.guardianpartners.com.au is the best account that I know of for this sort of thing. Think they have an office out west somewhere – still worth a drive even if far.
2. Lenders have different policies on who they require guarantees from. Some would allow the spouse to guarantee even if not on title or director. Maybe the wife could be a shareholder of the company, if necessary. Maybe you could still service without including her – which may increase your borrowing cap later on.
3. The Trust/Company borrowing capacity is determined by your personal income. Having a brand new trust with no assets is not a problem.
4. If the trust has one property, then your income plus the rental income from that property can be taken into account.
5. There are a few books around on trusts. Probably best to look on the net for articles. eg. http://www.lawcentral.com.au and http://www.taxlawyer.com.au plus http://www.chrisbatten.com.au
The general books are usually too general, the legal books are generally too complex to understand. There is not much in between. One I have is called “Trust Structures Guide 2005”. Don’t know if a new edition is out yet. It is good, but bloody expensive – about $350. Covers most trusts, and a bit on structuring business etc. This is in a few libraries, so you can borrow and save the price (deposit on a small property!)
If you want to look at the legal side of things, try search the uni second hand bookshops. They often have old editions of law textbooks going very cheap.
6. Yes, you have the idea. Directors sometimes go down with the company, so having one director (who owns nothing) will be a good asset protection strategy. It will also limit the amount of personal guarantees too. You don’t want you wife guaranteeing a loan if she doesn’t have to. This creates risk and limits borrowing capacity.
When setting up your deed, you need to be careful. If you name beneificaries, this could create problems with getting loans. Some banks (eg. Bankwest and RAMS) require personal guarantees from every adult named in the deed! Other banks, such as St. George want every adult beneficiary to sign a letter acknowledging the know the trustee is borrowing. This could be a pain if you have named your extended family. So talk with the person that sets it up, and try to keep this in mind.
Terryw
Discover Home Loans
Parramatta
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Thanks for the reply Terry, Much appreciated.
Troy
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