Personal Name or Company

[paulette]

Hi Guys

I currently have 2 IPs in my personal name, am looking at purchasing at least another 2 soon. I was wanting to get advice from other investors as whether I am best to start up a company and start purchasing under this. Should I transfer my 2 current properties into the company. Is it best to put only so many houses in one company and start another.
Also my bank only lets you have 5 IP's before you have to go to business banking with getting charged business rates etc. What do you do in these cases. Once you become a serious property investor do you not get residential interest rates.
Just wanting to know other investors thoughts, any advice would be appreciated as to what to do.
thanks in advance
Paulette

[graemeh]

This is a tricky area. You really need to go to someone who specialises in setting up asset protection structures.

One of the key things is what are you trying to achieve with the structures?

Try not to have all your loans with the one bank. It's safer if you have your business spread around, that way if one lender changes their policies and doesn't like you any more it only affects one or two loans, not all of them.

This also helps with the 5 property limit. The banks set these limits as they don't like to lend too much to one person. It's not the amount you are borrowing across all lenders that worries them, it's the amount that they are lending you that worries them.

[paulette]

Hi Graeme

Thanks for taking the time to reply to my post, your advise is much appreciated.
I have been talking to my accountant about the company thing, we are going to sit down and have a good look at it.
Do you think when I look at purchasing my next property I should go to a mortgage broker, instead of straight to my bank. At this stage I am going to borrow 100% using my other IP's as security, I may be best to have each with a different bank. I did have those thoughts in the back of my mind if I tied myself to one bank on a fixed rate then were stuck to do anything else.
So I take it banks don't mind if you have loans with other banks. Do you declare this to them when applying for a loan. Or just look at what you have with them.
Thanks
paulette

[RentMaster]

Hi Paulette

Regarding your first post...
If you do choose to set up a company, I would leave your existing properties in your own name for now. They could be a useful tool for later use. For example, if you choose to move into a larger house yourself, and you dont want a large mortgage on the new property you are living in, then at that point you sell one of your rentals to the company. The company gets a new tax-deductible loan to purchase the rental property off you, and you get a hand full of cash which you can do whatever you like with e.g. pay off the mortgage on the house you live in.

With regards to your second post...
I always recommend a broker. They are on your side. Good ones know all the best tricks and structures (e.g. more than one bank) and they can negotiate a good deal for you.

[paulette]

Hi Andrew
Thanks for the advice very handy to know.
By the way I'm using your sotfware and think it great.

[Monid]

Excellent tip Andrew, we are looking at upgrading our house and considering the idea of LAQC's this looks like a neat way to combine the two and pay off our own house in the bargain without having to complain about all the equity we have paid off what is soon to become an IP.

Actually think about it can you make the same move with your own house? i.e. sell it to your company at market value then use it as an IP?

Does it have to be sold at market value? Or are you just better off doing it this way?


I am also really interested when you change status in the banks' eyes is it 5 IPS or is it some set value of properties, do all banks have these criteria? If so what are they? If there is a mortgage broker out there this would be handy for all of us to know I think for the meantime Paulette and others who have been affected by this, which bank and what was their criteria?

Cheers David

[RentMaster]

Hi Monid

Actually think about it can you make the same move with your own house? i.e. sell it to your company at market value then use it as an IP?

Does it have to be sold at market value? Or are you just better off doing it this way?

The company and you are 2 separate entities, so in theory you can sell whatever you like from one entity to the other.

I used this technique myself as a result of my accountants advice. He told me to sell it at market value to avoid the tax department looking at it as tax evasion. I used the current GV value.

You will also have to remember that there can be some depreciation write back which occurs when you sell a rental property - regardless of who you sell it to.

Always best to check with your accountant for advice before doing stuff like this though. A good accountant knows all the tricks.