Finance with trust/company structure?
- Thread starter Bhp19
- Start date
10% is fine.
Hi Michael,
Thanks very much for your reply, it was a mortgage broking firm based in Brisbane who advised me of this. I then contacted a lending manager from CBA we know who said the following 'if a company/trust is involved we will have to order a trust investigation report (required). Investigation will be done by Minter Ellison Lawyers and fees will be debited from your account (should be under $ 300). We might also need a letter from your Accountant certifying that the company/trust was set-up for the purpose of buying residential investment properties.'
He also said we would likely need to go guarantors as we are the directors of the company and it has no financial history, is this information correct?
Thanks very much for your reply, it was a mortgage broking firm based in Brisbane who advised me of this. I then contacted a lending manager from CBA we know who said the following 'if a company/trust is involved we will have to order a trust investigation report (required). Investigation will be done by Minter Ellison Lawyers and fees will be debited from your account (should be under $ 300). We might also need a letter from your Accountant certifying that the company/trust was set-up for the purpose of buying residential investment properties.'
He also said we would likely need to go guarantors as we are the directors of the company and it has no financial history, is this information correct?
That person doesn't understand trusts or bank policy.
A lender may require the trust deed to be vetted to make sure the trustee has the power to borrow and the power to mortgage trust property. They may also want to ascertain that the trust is legitimately established, stamp duty paid etc.
A letter from an accountant is just silly. A trust would be set up with $10 or $20 property. The trustee would then have the power to buy realy property, accept gifts etc. Not sure how an accountant could certify that the trust was set up to buy property - or what point there could be for a bank to acquire such a letter. Perhaps they want to confirm that the trust doesn't trade.
A lender will definitely require personal guarantees from all directors - this is why it is important to structure the company and trust carefully so as to limit the guarantees - no need to give more guarantees than needed.
I would avoid dealing directly with a bank, especially a manager who has never seen a trust loan before.
^ For a CbA deal, yes that's correct. The cost for a CBA trust investigation is $192.50 ( Review of trust deed with no variation - if it requires any variation than they will add ~$30 on top for any subsequent variation)
Note:
1. A trust review/investigation is required by all lenders, and yes it comes out from your pocket ( $250 - $600 depending which bank and complexity of you trust structure/set up)
2. Some banks ( esp the some of the majors
) will "try " to charge a higher interest rate or higher application fee for a trust...but that's just BS- it's all negotiable...if not threaten to leave. 3. Some banks simply won't touch or may charge a higher rate/ set up fee for " corporate trustees" - this is also BS! Don't adjust your "structure" for the bank purposes..simply change banks. Trust structure is there for a reason ( especially corporate trustees)
4. Personal guarantee is always required from the trustee.
5. As terry mentioned, the letter from accountant is so BS as well hahah but unfortunately it's requested by the big 4 if this is your 1st trust purchase.
Most lenders, using a standard corporate trustee and family trust, have the same lending margins for these as for natural persons many up to 95 %.
However. If u are looking at a unit trust, with the borrower being the unit holder(s) and the corporate trustee being the security guarantor (ie the trust provides its property a security), then the lender and over options are quite limited with a few doing 90 max
Ta
Rolf
However. If u are looking at a unit trust, with the borrower being the unit holder(s) and the corporate trustee being the security guarantor (ie the trust provides its property a security), then the lender and over options are quite limited with a few doing 90 max
Ta
Rolf
Hi Rolf,
It's a family trust with the Company named as the trustee, with my wife and I named as company directors. We have also been told recently to remove my wife as a director and make her a shareholder instead as it would provide further asset protection, but again, I'm unsure if this is correct also?
It's a family trust with the Company named as the trustee, with my wife and I named as company directors. We have also been told recently to remove my wife as a director and make her a shareholder instead as it would provide further asset protection, but again, I'm unsure if this is correct also?
asset protection isnt my domain, a lot depends on who has the risk position in your family( ie self employed co director).
As for loans........... 90to 95 % lvr should be achievable IF you can also obtain same in personal names
ta
rolf
It can provide improved asset protection in 2 days
1. It may be possible to get away with one you giving a personal guarantee. So if the project fails the bank can only call on the trust assets, the company assets and your personal assets.
2. If the trustee company is sued and directors are liable then only one of you goes down.
Sorry, I just have one more question but it may require a bit of background first.
I am a PAYG employee in a secure, pretty high paying job in the resources industry and my wife has recently become a stay at home mother to raise our first son (2 months old) and we don't have any intention for her to return to work soon, at least 4+ years. I am 31 now and intend to work full time in the same industry for at least the next 10 years.
We currently have three investment properties which are all in my name (purchased two before we met and developed one to get the third) and a PPOR in both of our names.
We want to purchase more property using the family trust we recently set up with the intent to develop and hold, using the company we also recently set up as the vehicle to undertake the construction of the dwellings in these developments. We would like to replicate this over and over with the intent to combine this strategy with Rixter's CGA type strategy so that one day we can live off the equity.
What I would like to know is have we chosen the correct/best structure to do this, should I be the sole director of the Company for both asset protection and finance reasons and for anyone who has done this or similar, can you please provide any advice or recommendations of how we can successfully achieve our goal?
Thank you.
Ben.
I am a PAYG employee in a secure, pretty high paying job in the resources industry and my wife has recently become a stay at home mother to raise our first son (2 months old) and we don't have any intention for her to return to work soon, at least 4+ years. I am 31 now and intend to work full time in the same industry for at least the next 10 years.
We currently have three investment properties which are all in my name (purchased two before we met and developed one to get the third) and a PPOR in both of our names.
We want to purchase more property using the family trust we recently set up with the intent to develop and hold, using the company we also recently set up as the vehicle to undertake the construction of the dwellings in these developments. We would like to replicate this over and over with the intent to combine this strategy with Rixter's CGA type strategy so that one day we can live off the equity.
What I would like to know is have we chosen the correct/best structure to do this, should I be the sole director of the Company for both asset protection and finance reasons and for anyone who has done this or similar, can you please provide any advice or recommendations of how we can successfully achieve our goal?
Thank you.
Ben.
Impossible to say based on the above. Firstly, there is no best or correct structure. A 'structure' may be good for some 'things' but bad for others.
Secondly you need to look at the structure of your structure. How is the trustee company set up, terms of the trust and who plays wha role.
Do you know what happens to the trust and its assets upon your death, your wife's death or the death of both of you? Most people fail to consider this side of asset protection and I haven't met one client yet who had really considered it.
But, since your wife is not earning any income then allowing her to give a personal guarantee will provide no benefit to her or to the trust. She may still want to seek legal advice on this issue as there may be other reasons why she would want to remain director.
Hit and miss - or take legal advice!
