Reply: 1.1.2
From: Steve Piggott
Hello there!
Asset protection is one of the issues we will wish we addressed before the event when its needed occurs!!
Setting up a trust is not complex or expensive, in fact it can be the most important step in building your assets.
The deeds to the trust can be drafted specifically to suit your needs.
As a property investor every IP should sit safely in the arms of a trust.
I know it makes it initially difficult to borrow as LMI is not easy to obtain, but personally 80% LVR gives a little more comfort for both the lender and borrower.
If we are a little more educated in the area of asset protection and structures it will save a lot of grief.
The when to do it?
If we want to contain something we first need the container. I know I was so excited about buying my first property and fortunately I was convinced that I first needed a suitable structure.
Let me give you a real life scenario.
Mr X bought 3 IP's in his own name.
All were financed by the same lender and cross collateralised with his PPOR with an investor package with LOC.
Mr X used Landlords Insurance and was also handy with fixing small things on his IP's.
Mr X was asked by the tennant to supply an airconditioner so he fitted one in the window frame and a power point was nearby.
The AC required a 15amp PP but the easy thing to do was to change to a 10amp plug and use the nearby power point.
The electrical capacity was overloaded and as a result a fire broke out and guttered both of the roof sections of the 2 attached IP's. No one was injured but the water damage spoiled all the contents and the insurance company investigated and did not pay out as a result of discovering Mr X's electrical negligence. The tenants were represented by the tenancy tribunal and the landlord Mr X was now up for damages and legal fee's with no insurance.
Mr X lost all his IP's and his PPOR due to his negligence and lack of structuring.
If Mr X had used Trusts with a Company as trustee he would have been able to keep at least one IP and his PPOR.
For $300 per trust what would you prefer to happen.
I guess I have learnt as a result of this.
Just glad it wasnt me.
Trust in trusts.
Happy Investing Neb