All Topics / Help Needed! / Renovating for profit

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  • Profile photo of reno4profitreno4profit
    Member
    @reno4profit
    Join Date: 2010
    Post Count: 3

    Hello! I have just joined this forum and would love some advice!
    I currently work, married and have one child. Want to start a career renovating for profit and keeping some properties along the way if the figures stack up!  Here are our stats!:
    Me: salary $55k
    Husband: $40k
    House value $750k ( own outright in my name)
    Debts: $20k (CC's) no other debt
    I wish to make around $100k p.a. My husband's salary will be around $80k in 12 months ( training for new career).
    My questions are whether the investment properties remain in my name or joint names or I create a pty ltd?
    Thanking you in advance for advice and anything left field in the investment department!

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Your incomes are pretty much the similar so it won't really matter whose name you get it in with the first one. I would suggest you only use 1 to reduce the risk – if something were to go wrong only 1 goes down instead of both.

    If it works, then look a using a discretionary trust for the next one – again just using 1 person, keeping the other free. When you hit the borrowing limit start another trust with the 2nd person guaranteeing the loans.

    You have plenty of equity so can get a fair few properties – but go slow and plan properly.

    Actually, since the property is in your name let the husband guarantee or take the loans and therefore the risk. If he gets sued your house is separate so would probably be safe.

    You have also got to get rid of those credit cards – if you mean you have $20k outstanding.
    MAybe set up a small loan with the bank on a lower interest rate and pay this out asap. With no mortgage to pay you should be able to get rid of it in a year.

    With the new property you should set up a LOC on the existing house and then use that for deposit and costs on the new one. Borrow the remaining 80% from a different bank.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of reno4profitreno4profit
    Member
    @reno4profit
    Join Date: 2010
    Post Count: 3

    Thank you Terry for your advice!

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Adding to Terrys well made points:

    1) Do not call your Trust or Company something along the lines of "Smith Developments or Smith Renovations" as lenders just love lending to clients who they thing are doing this full time at residential rates instead of development rates and the associated fees that go with it.

    2) Have you thought about how you would go financing these deals once you give up work ?
    Not as easy as it sounds unless you have 2 years Tax returns and track record.

    Taking out a line of credit on your home at the sort of level you would need will send warning bells to any lender who will want to know what the funds are to be used for and why. Some lenders may want to direct the flow of funds.

    Your mortgage broker should be aware of the intracasies of this sort of funding as otherwise you could easily come unstuck very quickly and this could end up costing you a lot more in the long run.

    Richard Taylor | Australia's leading private lender

    Profile photo of reno4profitreno4profit
    Member
    @reno4profit
    Join Date: 2010
    Post Count: 3

    Hi Richard,
    Great advice again- in repsonse to your points:
    1. Something like  xxx family trust?
    2.I have thought about giving up work and would not until the lender would allow me to borrow on my husbands income solely. I suppose doing analysis of lending capacity on one income may assist in the worst case scencario for future renovation projects.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi reno

    Be suprised to hear what some clients call there Company and wonder why they cant get finance.

    You are going to be fairly limited on your husbands income alone so real carefull loan planning will be required.
    On his income you would be looking at a maximum (assuming all credit card liabilities were gone and he did not guarantee the loan on your principal place) borrowing of around $250K.

    As i say structure with a lodoc loan and line of credit buffer.

    Richard Taylor | Australia's leading private lender

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