Hi everyone
Just wondering how many of you use trusts for holding IPs and shares, and what type of trust structures are most popular.
I have no IPs or shares yet but I have been researching property for the past couple of years (since I bought my PPOR 2 years ago) - have read all the good books... Spann, Somers, Yardney, API magazine etc. Got my initial inspiration from one of Peter Spann's books and just kept reading! So now I'm ready to start investing!
Planning to buy 1st IP in the next few months and will continue investing in property (and later shares/LPTs when I learn a bit more about them) for the forseeable future, with a plan to retire in 12 years (from the day job, I'll keep investing) with the ability to Live On Equity / Passive Income from a large Property and Share portfolio thereafter. My wife and I are on reasonable incomes with no kids (yet) so our serviceability is pretty good. Aiming to have at least $15M to $20M in property and shares by 12 years time, with $4M+ or so in equity, which should be plenty for LOE, and I'll always keep a big LVR buffer there for emergencies, and keep investing of course.
So I want to get appropriate trust structures in place for all of this first!
I want the trust structure for asset protection, future flexibility and estate planning. I expect to always be negatively geared overall (as per the LOE plan), so income streaming is not an issue for the trust that holds my negatively geared property - it will always be negative.
So after that lengthy introduction, now my questions!
1. I'm thinking about a Chan & Naylor Property Investor Trust for the properties. I understand this uses a Unit Trust / Hybrid Discretionary Trust structure. Does anybody else have experience with this one?
2. How many properties should I put in one trust before I get a second trust. The IPs I'm initially planning to buy will be median price (houses, not units) in high capital growth Northern Beaches areas - i.e. $800K+ properties.
3. For the shares/LPTs, I'm thinking a normal discretionary trust, that can eventually feed extra income into the negatively geared HDT. Would this be the right structure. Should I use different trusts for different share portfolios?
4. Are the 'big-5' banks, Westpac etc., OK with Unit Trust / HDT structures for property investing? Do they understand these structures or will I have to spend ages explaining how it works.
5. Will this structure allow me to capitalise interest on my IP properties, and is this capitalised interest tax deductible for the next 12 years that I plan to continue working. Of course, once my LOE period starts then I won't be paying any tax in the first place.
6. Can I sell my PPOR to the trust in the future and therefore convert it to an IP, freeing up cash to buy a new PPOR. Can I sell it for any price, or does it have to be 'market value' - i.e. assessed by valuer etc? I understand this would incur stamp duty.
7. Should I use the same company trustee for all the trusts, or a different company for each trust.
Sorry about the long post and all the questions, but there are so many knowledgeable people on this forum that I'm bound to get some good advice!
Thanks!
Shadow.
Just wondering how many of you use trusts for holding IPs and shares, and what type of trust structures are most popular.
I have no IPs or shares yet but I have been researching property for the past couple of years (since I bought my PPOR 2 years ago) - have read all the good books... Spann, Somers, Yardney, API magazine etc. Got my initial inspiration from one of Peter Spann's books and just kept reading! So now I'm ready to start investing!
Planning to buy 1st IP in the next few months and will continue investing in property (and later shares/LPTs when I learn a bit more about them) for the forseeable future, with a plan to retire in 12 years (from the day job, I'll keep investing) with the ability to Live On Equity / Passive Income from a large Property and Share portfolio thereafter. My wife and I are on reasonable incomes with no kids (yet) so our serviceability is pretty good. Aiming to have at least $15M to $20M in property and shares by 12 years time, with $4M+ or so in equity, which should be plenty for LOE, and I'll always keep a big LVR buffer there for emergencies, and keep investing of course.
So I want to get appropriate trust structures in place for all of this first!
I want the trust structure for asset protection, future flexibility and estate planning. I expect to always be negatively geared overall (as per the LOE plan), so income streaming is not an issue for the trust that holds my negatively geared property - it will always be negative.
So after that lengthy introduction, now my questions!
1. I'm thinking about a Chan & Naylor Property Investor Trust for the properties. I understand this uses a Unit Trust / Hybrid Discretionary Trust structure. Does anybody else have experience with this one?
2. How many properties should I put in one trust before I get a second trust. The IPs I'm initially planning to buy will be median price (houses, not units) in high capital growth Northern Beaches areas - i.e. $800K+ properties.
3. For the shares/LPTs, I'm thinking a normal discretionary trust, that can eventually feed extra income into the negatively geared HDT. Would this be the right structure. Should I use different trusts for different share portfolios?
4. Are the 'big-5' banks, Westpac etc., OK with Unit Trust / HDT structures for property investing? Do they understand these structures or will I have to spend ages explaining how it works.
5. Will this structure allow me to capitalise interest on my IP properties, and is this capitalised interest tax deductible for the next 12 years that I plan to continue working. Of course, once my LOE period starts then I won't be paying any tax in the first place.
6. Can I sell my PPOR to the trust in the future and therefore convert it to an IP, freeing up cash to buy a new PPOR. Can I sell it for any price, or does it have to be 'market value' - i.e. assessed by valuer etc? I understand this would incur stamp duty.
7. Should I use the same company trustee for all the trusts, or a different company for each trust.
Sorry about the long post and all the questions, but there are so many knowledgeable people on this forum that I'm bound to get some good advice!
Thanks!
Shadow.