Finance structure help??

[T&T]

Any ideas on next steps??

I have PPOR worth $330-380K loan $255K with Rams (IO) bought 1 yr ago with FHOG. Would rent for $420 per week. Big break costs.

I went with Rams because I have a (small) credit default which will be wiped in May 2008.

My partner (not living together yet) has IP worth $250-265K loan $160K (P&I) with St George - no break costs.

We have a combined income $170K before tax and have $36K in savings. We can save up to $50K per year at the moment.

My mother (lives and works in England so doesn't earn an income in Australia) would also like to go halves in a property with us and has around $50K to spend.

We both used mortgage brokers for our first purchases but don't think they (these particular brokers) knew anything about investing and we want to start building a substantial property portfolio.

We would like to buy a better PPOR in the next few years but the priority is to build equity as quick as possible without compromising lifestyle too much.

We are looking at buying 3-4 properties at around $200-300K each in the next 6 months.

We will be looking for a good mortgage broker to assist but any ideas in the meantime?

I am interested to hear how you would suggest structuring finances and names on mortgages / trusts etc in order to maximise borrowing ability down the track.

I know it's a bit of a complex one but any suggestions would be really appreciated.

Thanks very much.

 

[agent007]

Any ideas on next steps??

I have PPOR worth $330-380K loan $255K with Rams (IO) bought 1 yr ago with FHOG. Would rent for $420 per week. Big break costs.

I went with Rams because I have a (small) credit default which will be wiped in May 2008.

My partner (not living together yet) has IP worth $250-265K loan $160K (P&I) with St George - no break costs.

We have a combined income $170K before tax and have $36K in savings. We can save up to $50K per year at the moment.

My mother (lives and works in England so doesn't earn an income in Australia) would also like to go halves in a property with us and has around $50K to spend.

We both used mortgage brokers for our first purchases but don't think they (these particular brokers) knew anything about investing and we want to start building a substantial property portfolio.

We would like to buy a better PPOR in the next few years but the priority is to build equity as quick as possible without compromising lifestyle too much.

We are looking at buying 3-4 properties at around $200-300K each in the next 6 months.

We will be looking for a good mortgage broker to assist but any ideas in the meantime?

I am interested to hear how you would suggest structuring finances and names on mortgages / trusts etc in order to maximise borrowing ability down the track.

I know it's a bit of a complex one but any suggestions would be really appreciated.

Thanks very much.

Hi T&T,

I don't think a mortgage broker would be the best person to assist you with this question but, a good accountant will.

They way I'd do it is by setting up an Unit Trust which would be the entity acquaring the assets. The trustee of the Unit Trust can be an individual or a corporate one (it all will come down if the Unit trust would be involved in a business or not).

The Unit trust will allow to distribute units between the different unit holders based on the amount of the contribution. Then, the next question is who are going to be the unit holders???. They could be the 3 individuals you mentioned (you, your mother and partner) or another Unit, Family or HDT trust. It also could be a combination of them. This structure would allow you to do -ve gearing if setup and used properly while at the same time providing asset protection and flexibility. The other advantage is that in the future, it would allow yours SMSFs to participate in the existing assets. You or your HDT or family trust would redeem units which would be acquired by the SMSF.

Please, check with an accountant that knows about trust and IP investment.

Cheers,

James.

 

[alexlee]

T&T, have you calculated the cashflow implications of buying $1m+ in property? Are you guys ok with those sorts of numbers? You're probably talking about $20k negative AFTER tax.
Alex

 

[Rolf Latham]

Hiya T&T

Im thinking you have some thinking you need to do.............as has been mentioned, get specific advice on this please .
One too many people involved in the titles perhaps.

Whats curious about your comment about the default is that all Rams loans are mortgage insured ?

Seems odd that one wouldnt have a go at a non securitised lender ?

ta
rolf

 

[T&T]

Thanks very much for your comments and yes I agree that there is a lot of thinking to do.

I guess that having a good accountant on board will be the next step. Any ideas on what they would charge to set up a suitable investment structure?

I have spoken to a mortgage broker who was recommended by this forum and seems to know her stuff.

I am calculating the cashflow figures at the moment and would be ok if buying with well above average returns only.

By non securitised lender do you mean lenders like wizard etc. My impression was that they charge higher rates with high break fees also.

 

[wanelad]

Lower rates but higher break costs in the first few years