Finance Declined - Unit Trust

[Mick C]

A common set up that's sold by some of the famous/infamous "property guru/talkers/presenters"....use your friends to invest $10-20k each and those with no cash can hep with servicing on a monthly basis etc..

1. BWC does this under their comm terms and team- run
2. NAB - ok with trust...but something with multiple trust it's too complex for the NAb credit team lol

Normally any deals that involves either more than 4 trust OR more than 6 directors i would highly suggest CBA ( very quick can turn around a approval within days...even pre-approvals) or St George/amp/ANZ ( takes a bit longer)

I done a few of these before esp in the last 12 month....but 9 is massive and a headache i would say! biggest i dealt with is 7 and each one had a family trust with a corporate trustee as well....

 

[Terry_w]

Most banks charge an extra fee per guarantee as well as requiring independant legal advie. This alone will cost a few thousand.

I think you need a strucure rethink.

 

[westminster]

It certainly has raised the issue that whilst structure is important it also impacts greatly on what the structure can then do.

A lawyer can set up a structure which protect the parties but if they are not familiar with lending practices OR they are not aware of what the parties wish to do then it might not be the right structure.

If the parties in this instance were all putting in enough money to do the project and didn't require lending then it probably would have been ok.

 

[Paul@PFI]

Its not uncommon to run into finance difficulties if the UNITHOLDERS to the trust seek to borrow $$ and they are unrelated or if the Trustee Directors are different. Problem is A & B may be the Directors yet A + B + C are unitholders and C may well be seeking to fund their investment through the bank. Yet C doesn't give any security. A & B could end up paying for the party yet they weren't invited. Banks have two concerns in my experience....One is a tax issue and the other a legal liability issue.

Banks seem reluctant to take a joint and several charge (guarantee) from each party. Its a bit like asking grandma to be guarantor - Banks don't like it.

As a minimum they may seek legal sign off and it can get costly and complex. So sometimes its easier for the credit manager just to say no if it doesn't feel right.

9 = a widely held trust which is a far more difficult lend for any bank.

 

[Sean M]

9 different owners hope all get along and no one will pull out.

 

[MoneyFairy]

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.

CBA can do Unit trust structures - I have done something similar in the past with Super funds with people who don't have enough to do SMSF on their own so they get together with a few friends and their Superfund makes a one off investment into a unit trust. The Trust buys the property and then when its been held for an appropriate length of time the property is sold, and the proceeds split between the directors.
Does that sound at all like your set up?

 

[Terry_w]

CBA can do Unit trust structures - I have done something similar in the past with Super funds with people who don't have enough to do SMSF on their own so they get together with a few friends and their Superfund makes a one off investment into a unit trust. The Trust buys the property and then when its been held for an appropriate length of time the property is sold, and the proceeds split between the directors.
Does that sound at all like your set up?

You must mean unitholders.

In this op's situation it is not the fact that the trust is a unit trust, but the way the trust is set up that is causing problems.

 

[lizzie]

I am surprised that the NAB can't handle it.

We applied for a loan (via broker) with NAB ... SMSF - rural - commercial ... they had a meltdown and couldn't cope. We ended up paying cash. Nothing about NAB's inability to think outside the box surprises me.

 

[lizzie]

Nine males only.

God help the decor and styling ...

 

[D.T.]

God help the decor and styling ...

They did mention female consultant

 

[lizzie]

They did mention female consultant

phew ....

 

[D.T.]

phew ....

But luckily with males the decision making won't take all year.