Finance Declined - Unit Trust

[Mr. Wolf]

We have been knocked back by two banks now for a property deal (Bankwest and NAB). Deposit and serviceability not an issue, but the appropriate structure.

Our Structure consists of a Unit Trust with a Corporate Trustee. We are equal partners and each of us holds 1/9th of the units through our family trusts (which all have corporate trustee for the family trust, except one). All the nine unit holders are also Directors in the Corporate Trustee.

The structure is okay from a tax and legal perspective ? but banks are not coming to the party. Want to get this right before we make another offer and waste every ones time.

Looking at tweaking it. One suggestion we have had is to split it into two, so that four members can apply for finance for the block and the rest finance. Not sure if we can have two companies sit under the unit trust, with two sets of members as directors ? and the issues it will raise form a tax/CGT perspective.

The other alternative is to just go as tenants in common ? but this is something we have been keen to avoid.

How can 9 guys borrow money at residential rates? Not trying to over engineer stuff ? just looking for something that works with banks.

 

[D.T.]

I had no trouble at all with my unit trust with corp trustee buying at 88% LVR recently.

Firstly, I wouldn't go with Bankwest if you paid me, and NAB from memory doesn't like unit trusts much.

I did mine with CBA and they had formal approval out to me in about 5 days and sat round for other 85 days of settlement twiddling thumbs. The way to do it, was to borrow in your own names to buy the units. The unit trust is then guarantor.

I'm not a broker though so perhaps talk to someone who is so they can get it through for you.

Also, for the love of god, stop applying to banks directly because all these declines your credit file will add up one day.

 

[Mr. Wolf]

I had no trouble at all with my unit trust with corp trustee buying at 88% LVR recently.

Firstly, I wouldn't go with Bankwest if you paid me, and NAB from memory doesn't like unit trusts much.

I did mine with CBA and they had formal approval out to me in about 5 days and sat round for other 85 days of settlement twiddling thumbs. The way to do it, was to borrow in your own names to buy the units. The unit trust is then guarantor.

I'm not a broker though so perhaps talk to someone who is so they can get it through for you.

Also, for the love of god, stop applying to banks directly because all these declines your credit file will add up one day.

I think the issue is the no. of parties involved, not the Unit Trust per se.

We have not dealt directly with banks, and no hits on credit files (we didn't get to that point) We have a broker, who is also a member of this board.

 

[D.T.]

I think the issue is the no. of parties involved, not the Unit Trust per se.

We have not dealt directly with banks, and no hits on credit files. We have a broker, who is also a member of this board.

Oh ok, how many parties did my one have?

If your broker doesn't know how to get it through then I'd suggest you need a better one? Or perhaps you didn't follow their instructions?

 

[Peter_Tersteeg]

BankWest isn't a very good lender for trusts.

The structure you've got is fairly paperwork intensive, but not entirely unexpected for a deal with multiple parties in some sort of JV arrangement. Whilst I'd hate to be the person trying to sort through the paperwork, I am surprised that the NAB can't handle it.

 

[Mr. Wolf]

Oh ok, how many parties did my one have?

If your broker doesn't know how to get it through then I'd suggest you need a better one?

We have had two brokers so far. The first spoke to Bankwest, they said they would lend us on 80% LVR. Submitted paperwork - they said structure was too complex. Moved onto to another broker, NAB was okay - but took too long and at the end no finance. Looking at a simpler way of doing this. In both instances the banks were initially interested, so I can't say it is the brokers fault. I can't say we didn't follow their instructions.

 

[Rolf Latham]

NAB dont like unit trusts much at all and BWA dont like to run them via resi retail.

Plenty other good options like CBA, choicelend, Suncorp, Macq etc

BUT obviously , I dont what the reasons are for the choice of lenders in your circumstances

ta
rolf

 

[Terry_w]

The structure is okay from a tax and legal perspective ?

9 directors! I would never set up like this. 9 guarantees!

Did you get legal advice before setting this up?

 

[Mr. Wolf]

9 directors! I would never set up like this. 9 guarantees!

Did you get legal advice before setting this up?

Yes, that's what our lawyer suggested.

What set up would you suggest?

 

[Rolf Latham]

Yes, that's what our lawyer suggested.

What set up would you suggest?

Joint and several laibility nightmare from a future finance perspective

dunno what the soln, is, but 9 directors aint it unless its Woolies or Wesfarmers

ta
rolf

 

[Peter_Tersteeg]

Yes, that's what our lawyer suggested.

What set up would you suggest?

9 people is a bit of an unmanageable group size. Is the group 3 couples and a single, is it 9 singles, or some other combination?

The more people you get involved in a project, the harder it gets. It's painful dealing with two couples. 9 people is a bit of a nightmare; the finance application would be best facilitated like a town hall meeting.

 

[Terry_w]

Yes, that's what our lawyer suggested.

What set up would you suggest?

Hard to say without knowing the details. ideally 1 director in any case.

 

[Mr. Wolf]

9 people is a bit of an unmanageable group size. Is the group 3 couples and a single, is it 9 singles, or some other combination?

Nine males only.

 

[Terry_w]

Nine males only.

Even worse than expected!

 

[D.T.]

Even worse than expected!

At least they'd be capable of making decisions

 

[Mr. Wolf]

Even worse than expected!

Lol. Why is this so? Making decisions has been fairly easy - no emotions attached - in fact the only issue we have faced so far is the finance.

We have an independent consultant though (a female) - so that makes it easy making objective decisions.

 

[sanj]

I'm curious, why so many people? Is there something about a specific property that warranted this?

 

[Mr. Wolf]

I'm curious, why so many people? Is there something about a specific property that warranted this?

Nah, just mates coming together.

 

[sanj]

I'm all for people investing together, I do it myself and have often defended the idea but the issue is practicality and getting finance for a resi property with 9 guarantors sounds like a nightmare

 

[Terry_w]

Imagine the effect on serviceability.