Properties in Hybrid trusts may need to be sold to release equity
- Thread starter redwing
- Start date
its close,but not quite that bad, though as a general comment, its about right
some lenders will accept these orphans even though on the surface they dont.
Very tough to get a loan above 80 % as well,so a HDT isnt something id be tipping my resources into right now
ta
rolf
some lenders will accept these orphans even though on the surface they dont.
Very tough to get a loan above 80 % as well,so a HDT isnt something id be tipping my resources into right now
ta
rolf
I've got 3 properties in a HDT. With all the changes since the trusts inception we've considered selling but unfortunately these are great long term holds. We asked for an extra 5 years I/O from anz last year and were only granted 2. Just got unconditional on top ups for the other 2 with AMP and while they were pedantic about seeing the deed again and letters from the accountant they all went through.
Our accountant has recommended that we have a chat with them in the near future to discuss our options as they feel the days of the HBT are nearly up. I'm thinking that their suggestions will be very expensive.
Our accountant has recommended that we have a chat with them in the near future to discuss our options as they feel the days of the HBT are nearly up. I'm thinking that their suggestions will be very expensive.
His point is fairly valid/possible. HDT are a nightmare for anything over 80%. Last one I did was about 3 months ago at around 87% and it wasn't a pleasant experience. You are definitely limited by choice of lender.
The important thing is for people to understand this prior to spending "x" amount of money setting up HDTs.
The important thing is for people to understand this prior to spending "x" amount of money setting up HDTs.
Agree with you Aaron.
I always thought if you have more IPs, it worths to look into trust for protection. Looks like it's better to be just straightforwards with all IPs put under you, rather than encountering legislative changes down the track.
most lenders still wont touch that.
And at that point, why bother.,the primary benefit of the HDT is to provide neg gearing to a typically PAYG income earner.
ta
rolf
This is really just trying to make the lenders think it's a more mundane trust. If they properly vet the trust deed properly it would likely run into problems.
HDTs have been a mess for quite a while now. This news is nothing new.
Hmm... and expose yourself to paying capital gains tax twice?
Once at redemption and again when the DT decides to sell later on?
Sadly for some even selling may not be an option if they have continually maxed the LVR on their properties to buy other ones as CGT will be calculated on the original cost base.
I think some of the promoters of this structure have now moved on to pushing Land Tax Unit Trusts instead... which will be a great money earner for them till the rules change again!
Accountants and lawyers with strong biases and vested interests are simply not the best people to give overall financial/wealth/investment management advice.
Accountants and lawyers with strong biases and vested interests are simply not the best people to give overall financial/wealth/investment management advice.
I have consistently said that the majority of RIP investors do not need trusts. There is simply nothing to protect. If we are talking commercial properties or property development then that is a different story. Buying a small house in St Marys or Mt Druitt is unlikely to warrant the thousands needed to set up / maintain the trust.
Agreed. I'd only put commercial property and shares in a DT, and nothing fancier than that.
Most of these HDTs are just discretionary trusts with the ability to issue units. A lot of other trusts out there are actually hybrid trusts but they are just being used as discretionary or unit trusts.
My understanding is that the major problem with the finance for HDTs is the fact that the borrower for the loan needs to be different to the owner of the property. THis is like you owning the property but me getting the loan - not straight forward.
Making the loan and the ownership in the same names would greatly assist in getting finance approval.
these are 2 separate issues, I feel
One relates to the "third party" guarantee that many lenders have always had an issue with, the HDT component will always sit there unless the deed removes the capacity to issue units.
Im not a soli, so the last bit may not apply.
I have a large bunch of these in my client portfolio and they have become problematic, but not impossible.
ta
rolf
But the mandatary legal review of the deed will bring it out pretty fast...
Terry as we're both aware, most HDT lending structures require the loan to be in the name of the individual (not the trustee). This unusual loan structure usually the giveaway to the lender that it's a HDT.
If you put the loan in the name of the trustee and don't say otherwise, some lenders may not look too closely and would assume it's a discressionary trust, is within policy and simply go with it.
If they vet the trust deed properly, their legal person would likely pick up that it's a hybrid trust and make this part of their report. If this is outside the lenders policy then no amount of legal or tax arguments are going to save the deal from a decline.
If you put the loan in the name of the trustee and don't say otherwise, some lenders may not look too closely and would assume it's a discressionary trust, is within policy and simply go with it.
If they vet the trust deed properly, their legal person would likely pick up that it's a hybrid trust and make this part of their report. If this is outside the lenders policy then no amount of legal or tax arguments are going to save the deal from a decline.
