Firstly thank you everyone for your posts that I have been reading, I have learnt so much since I first started visiting this site and have finally had a chance to ask a few questions now that I own a property. I currently own one IP and have been in discussion with a business friend in regards to combining our borrowing power to create a property portfolio.
I have been reading up on trusts but am not sure how to link this in with my current IP and the property partnership. From all reports I cannot put my current IP into a trust if the property was in my name before the trust is set up. Am I correct?
If that is correct, is there any way to somehow borrow against any future equity in my IP and put it towards IP's in the trust? I am obviously trying to gain the benefits of my current IP and use it to leverage into more properties but do not know how it can work in with the trust, especially considering my business partner does not have an IP to borrow against which would make things uneven and complicated as far as I can see. Am I better off keeping my current IP totally seperate from my business partner and using that as a side project?
Any information anybody has, including any professional contacts in Melbourne that may be of assistance to me would be greatly appreciated.
Brendan
Hi Brendan
Firstly welcome to the site and i hope you enjoy your time here.
You are right that you Trust Deed needs to be dated prior to the purchase contract so it is wise to set this up first off.
Your existing property can be transferred into the new Trust but would trigger both additional Stamp Duty and possible Capital Gains Tax so may not be worth it.If you intending to buy with a partner (And by the way i would strongly encourage you to think again before going down this path) then a Unit Trust structure maybe more appropriate.
Personally i would be doing my own thing especially if your partner has no cash input or equity to gear against.
cannot enter into a purchase contract until such time as the TrustRichard Taylor | Australia's leading private lender
Current property can be used by the trust in 2 ways. The trust can use your personal property as security and you could get a LOC on the property and lend money to the new trust too.
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
Thank you both for your quick replies. I am extremely grateful for your advice.
So if my strategy is long term hold, would the fees to transfer to a trust be worthwhile long term? Are there any benefits to holding that one property outside of the trust besides the saving on the costs to transfer to the trust? If I do my own thing, what trust is best? Do I need a lawyer to set up a trust or is an accountant fine? Sorry for all the questions, I am pretty excited about all the options ahead of me but want to make the right decisions from the start (minus my frist mistake of not having a trust already!).
Richard – I am still extremely keen to go down this path myself however I am finding that by myself I would be pushing my financial limits by entering into another property purchase for what I want. I know the best thing is to hold off a little longer and wait for more equity to contribute to my next purchase however property prices are starting to outrun my borrowing power as I am going for a high capital growth strategy close to capitals. I achieved 11% capital growth on my property in 6 months so if that continues I may be able to build up a reasonable amount of equity fairly quickly. The other option is to change strategy and buy a CF+ property (if they are around) whilst I wait for that equity in my first property to rise. I am very driven and have no doubt I can do it myself however I guess I am starting to panic under rising house prices and interest rates. Sorry for change of direction from initial post.
Brendan
Hi Brendan
I think you would be better off to leave the first property in your own personal name given the costs involved especially whilst the property is mortgaged and your liability reduced.
Utilise the available equity as deposit and go again in due course.
Dont forget a fixed rate takes a lot of the panic away over increasing interest rates especially if this is a concern.
Just be careful and ensure that you structure the loan correctly before you fix the rate as any change could be expensive down the track if you need to get out of the loan to access the equity.
Richard Taylor | Australia's leading private lender
You can always transfer your property to a trust a few years down the track too. This may give it time to build up more equity which can be released to pay off your home loan (but would result in more CGT probably).
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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