Hello All
I need some advice to get our PI ventures in order before we start.
My situation is that I work for wages-nursing, so limited income with hard work.
I have a mortgage on my home of $140,000.The property was valued in 08 at $610 k.
I also have a mortgage on a commercial property (childcare centre) of $300 k. This property was valued in Oct 09 at $670 k.This property is leased to a family member who runs her business from here for a minimum rate- she pays the mortgage repayments. I pay the rates……this is going to be reviewed very shortly and bought into line with market rates.
As I have had both properties for some time-(was newly separated and had no idea of finances/ property investing) home since 2001 and childcare centre since 2005, my loans etc where established with very little thought to structuring.
So now that my partner and I have been reading Steve's book and wanting to get into PI we need to get the structure sorted to put us in a better position before going on.My partner is also on wages with no assets or debt with some cash in the bank and a self managed super fund.
So some questions are;
My partner and I are going to join forces, so do we set up a trust?
Can I do anything with my already established loans as far a better structuring?
Can we use the super fund(with my super transfered into the fund also)to buy property?
Is it a good idea to transfer my super from a gov. managed fund(State first super) to a self managed super fund.?
Should we sell the childcare centre and invest in positive cash flow property thru a trust or whatever?
Any advice would be appreciated as it seems to be a jungle out there but we need to put our equity to work.
Regards
Wenever.Hi Wenever
You have heaps of equity so heaps of potential. The first thing you should consider is making both loans interest only. Set up a LOC on each property for the equity up to 80% LVR (this may not be easy in this climate).
Then you need some expert tax advice. You can structure the investment property in such a way that will pay off your home loan sooner. I roughly worked out that for every $100,000 in a LOC you can pay an extra $6,000 off your PPOR loan over and above what you are paying now. Your case may be much more.
At the same time you can also start investing in further properties (and making further savings).
You should look at setting up a discretionary trust. But you need to be careful on who you put where in it so as to maximise borrowing capacity. I would recomend 2 trusts with only one partner invovled in each. This will enable you to borrow more, ie increase long term serviceability.
You could buy in the SMSF, but I would suggest you don't because any equity developed there won't be accessible. Look at shares maybe.
Whether you should sell the child care centre would depend on if you think it is going to increase in value. Selling means CGT, and other costs, so it is only worth doing if it is underperforming.
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 Wenever
Terry has given an excellent explanation of how to structure your loans going forward.
Is the Child Care centre cross collateralised with your own PPOR if so accessing equity could be difficult as lenders have become very scared on CCC security after the ABC collapse.
Ideally you might look to restructure the Commecial loan to free up your PPOR equity and this may take a bit of digging from your Broker as to where to find the best home for such an Asset class.
Other than that there are a few other lending options when it comes to moving forward.
Richard Taylor | Australia's leading private lender
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