could anybody please tell me,
would it be better to have one loan for 3 or 4 IP'S, or 3 or 4 seperate loans?
what are the fors and againsts with this situation?at present we ( wife & i ) have one IP, and just over $100,000 in term deposits.
we don't owe much on the current IP and would like to buy 1 or 2 more IP'S.
we would like to have the investments all around the cash flow neutral area.we also own our PPOR.
just not sure how to structure the finance side of things.
as the IP'S become more cash flow pos.,[ by paying more $ on the loan/s, and by reno's and cosmetic work to increase the rent, etc,],we will look at buying another to bring the investments back to slightly cash flow neg.
any help or advice would be appreciated.
bicky.
Personally i am in favour of having the loans and securities separate.
It doesnt matter on what property you secure the loan (Usually when you are borrowing 100% + costs you will need to offer additional security or take out a loan on another security to cover the 20% + costs) as long as the loans are not crossed.
Whilst this may not cause an initial problem it would down the track if your lenders terms changed.
Keep them separate from day 1 and you wont have that problem.
Richard Taylor | Australia's leading private lender
I agree with Richard that is it better to keep them all separate.
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
Richard and Terryw, thank you for your response.
if ,i felt the property market was at the start of a boom, i would consider borrowing 100% + costs, and allow them to be neg geared.
but, i still want to be in the market with the properties closely covering costs, [ with the right sized deposit ].
i thought maybe with one loan i might save on monthly bank fees and application fees,etc.
is this not a good idea because it would be harder to see what each property is doing reguarding tax?
what problems might i have if the lenders terms changed?
any other reasons?
excuse my ignorance, i'm still learning.
thanks again
bicky.These days most banks have professional packages with no application fees – just an annual fee which includes around 6 loans on the one fee. So there is no need to combining loans. I cannot see any benefit, just complications at tax time, and also if you wish to sell or refinance one with another bank later on.
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
Hi Bicky,
This is a sticky question, because there's alot of grey area here.
In general (very general) keeping properties seperate will make it easier at tax time, easier to refinance and could save you money if things went wrong with the lender you are with.
In some cases the lender will make you revalue all of your property each time you get a loan, as the equity is calculated on the combined value of your property if they are crossed.
However in a pro pack, where there are no or limited fees for doing all the switches and vals required, its more of a headache than an actual cost incurred. If you were not in a pro pack and were paying for vals…. different story.
The grey area comes because alot of people think they have complete asset protection by keeping properties seperate, which is not the case.
Most mortgages have a clause which allows the lender to claim against non-mortgaged assets if you default on your loan and don't have enough security to pay it out. So your other properties will still be sold up if need be.Having separate lenders merely ensures the investment lender will sell your investment property first, then chase your home loan next!
Lia
hi Lia,
thanks for your response.if you only borrow 80% of the value of the property, you should be able to get a morgage without a clause in it that allows the lender to claim against non-morgaged assets if you default on your loan. [ or even other morgaged properties].
also without having LMI to pay.this would also help the property be closer to cash flow positive.
these are the lines in which i would like to continue investing in.bicky.
if you only borrow 80% of the value of the property, you should be able to get a morgage without a clause in it that allows the lender to claim against non-morgaged assets if you default on your loan. [ or even other morgaged properties].
also without having LMI to pay. – Hate to say it doesnt work that way. The Bank are not going to change their standard mortgage terms and conditions for you.Richard Taylor | Australia's leading private lender
thanks richard,
i was not aware that these were standard morgage terms.
i guess this was what lia was explaining.
how then, do i obtain some form of asset protection, reguarding other properties?
maybe, have some properties in my name only and some in my wifes name only. would this help?
if the property was bought in my wifes name and the morgage was in my name ,this would not help either would it?
can you have this situation anyway?i dont fully understand companies and trusts and how they operate.
any answers or comments are appreciated,
many thanks,
bicky.
If a deal falls over and the bank sells you up, they are likely to be able to come after your other assets whether they are mortgaged or not. The only real way to protect other assets is to not own them – have another person or entity own then, preferably as trustee. Another possible way to protect them is to allow another party to mortgage these assets.
And watch out in putting assets in another person's name – what will happen if they go under = your assets may be taken!
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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