Whats the simplest way to purchase IP

[rancher]

Hi I posted a thread a couple of days ago and got no replys (http://www.somersoft.com/forums/showthread.php?t=16585) but I have since searched the forum and found a few answers.

Back to basics; in short can I have help with taking the first step.

scenario; $750,000 from sale of property. No income.

Purchase land to build on $150,000. Will have to wait up to 8 months for builder.

Purchase IP $230,000 through trust as a PPOR with 20% deposit,$46,000 + costs $3000 (SD $2300 (Qld ppor) legals $700) and rent back.

Invest $450,000

Question: What do you ask the lender?
Do they take security over the land? Or do I take an LOC over the land or just use cash to pay the deposit and borrow $180,000.
Would you buy through a trust and if so does this affect stamp duty in Qld is home owner is $2300 compared to investment $6575.
Or would you see a mortgage broker first.

Question: Rent would be around $200 which would leave around $40 / week shortfall and would top up from investment returns.

I know I've read on the forum that the first purchase is the toughest and its right, you read so much you are in overload so could you please help in the simplest way to go about all this.

Cheers Ross

[Les]

G'day Ross,

Seems to me there are a bunch of questions that will "pop up" as you sort this out. As such, I'd go with your last point, and start with a GOOD MB !! I use Rolf Latham, and have found him equal to any question I have for him. BUT, I have NEVER bought "just land", and I do believe there are special considerations with "just land" (i.e. I think I've heard that land purchase is QUITE different to an IP - there is no income from land, and that creates its own problems - but I don't know the details that you will need to know - sorry). I don't even know if Rolf will know either - but he's been around a while, so is "way up there" compared to me.

Suffice to say, your situation is "out of the norm". Hopefully, others on the forum might have already "been there, done that" and can add useful info accordingly. But, if it were me, I'd be starting with the "lending" bit (i.e. a Mortgage Broker) and see where that leads (followed by a visit to the Acct). And, good luck,

Regards,

[Rolf Latham]

Hi Rancher

The finance bit is the easy one.

Im assuming that you will build a PPOR on that land.

Question as always will be are you going to live there for ever or is there a chance you may one day turn this into an IP. If yes then there is a slightly different finance structure available to you.

In any case you dont want to pay interest on the land seeing its unlikely to be deductible unless you do the rent back from the trust thing.

Step one really needs to be decisions on what and how with the trust. In your case, because you have good equity, finance can and should be finalised after holding structure. if you were light on equity and needed Lenders Mortgage Insurance it may be a different kettle of fish.

ta

rolf

[rancher]

Hi Les

The reason I'm buying the land is to build a PPOR on it as the properties on the market at the moment are overpriced. One acre home and land is now ranging from $450 to $650k plus. But as it is hard finding a builder at the moment and I did not like the idea of forking out 6 to 8k on rent in the coming months so I though I would buy an IP.
Hi Rolf
As explained above, I would be building a PPOR on the land and yes there may be a time when we upgrade and convert the PPOR to an IP.
I will not be paying interest on the land as I would buy it outright and build as soon as possible.
As Les asked in my previous post I will be looking at further IP's down the track, but it may have to wait a couple of years untill there are better yields.
One other thing Rolf if I buy through a trust situation should I buy the land through the trust.
Does buying through a trust affect stamp duty as explained above there is a $4,000 difference between buying PPOR and Investment properties.

Cheers Ross

[Rolf Latham]

Hi Rancher

If the cost of the increased stamp duty is 4 k (check with conveyancer) , id suggest its about that, then I would have thought thats a minimal cost for the long term benefits of the trust in both tax management and asset protection ?

Ta
rolf