Three properties all in own name, what to do?

[kiwi_crusader]

hello everyone,

just wondering what the professionals would do in this situation.

i have two rentals and family home all in my own name, i asked my lawyer and accountant at the time of first purchase of i/p three years ago about setting up a laqc, both said why it's making a profit.
the second one was purchase this time last year and making a loss of about the same as the profit of the first one. so all cash flow neutral.

all properties with the same bank, now here's my problem.

was hoping to take the first rental away from that bank and purchase another property with the equity in it, but have found out they have me all tried up it knots.

was sitting at 81% equity this time last year in all three but the first has about 55% in it.
bank has already said no to new loan because they feel the reg valuations would have dropped too much so don't bother wasting money on them!

now seeing they are all in my own name could i set up a laqc or trust now and go to a new bank and take out a mortgage for the company and pull out the equity?
it will still be showing a profit with todays interest rates of about $150 a week.

i know i could take all the properties away to another bank but i still have along time to run with fixed rate with the other two, break fees not worth it.

i'm about to go back to my accountant again with what structure suits best, but would most appreciate your opinion's

many thanks
wayne

[essence]

Hi Wayne

Before I start, (The disclaimer bit!!), I am not an accountant nor a lawyer. My comments should not be relied upon as financial advice in any way shape or form.

At this stage of your investing, having them in your own name or having them in an LAQC doesn't really matter, as both with allow the loss to come to you. What you should be looking at is what the financial position will be in 4+ years and the structures needed then to protect your investments.

Yes, it's future planning but isn't that why you got into PI?? To make your future rosier??

Don't forget that there will be depreciation claw back on sale (at any time to any entity) and the longer that you leave the sale, the more depreciation will have to be clawed back.

Was sitting at 81% equity this time last year in all three but the first has about 55% in it. Bank has already said no to new loan because they feel the reg valuations would have dropped too much so don't bother wasting money on them!

They are correct in saying that the reg valns could have dropped, but at the end of the day, the houses are in YOUR name NOT the Banks (even though they own the mortgages ). It's your decision and they should not be trying to overly influence your decisions. They might see it as saving you money.

You can get a desktop valuation through QV, which as described, QV just compare your house to recent house sales and therefore your house is XXXX. They don't even leave the office. Costs about $175 per QV (I know cause I've recently had some done). Takes about two days before QV is received by email.

Perhaps it might be a good idea to go to another accountant, just for a different perspective. You don't need to change accountants at this stage, just ask advice. If you're still happy with your present accountant, stay with them, if not change. Easy.

Accountants/lawyers/doctors/car mechanics et al are all the same. Some are very good, some are average, some are pathetic. Just because they have qualified in their chosen profession DOESN'T MAKE THEM COMPETENT.

Good luck and keep us posted.

[Rosco]

Hi Wayne,

My understanding is that your major issue is not being able to get finance to buy another rental.

Therefore your first step would be to talk to a good mortgage broker. They are normally free to use. So I suggest chatting to them and see if changing to LAQC's, Trusts etc would make any difference for the banks.

You could try a couple I like

Jacob Anals - Mike Pero Hamilton
Michael Paris - Mortgage Link Hamilton

Ross

[Keithw]

The problem with "selling " to the LAQC is that the bank still views the LAQC as you.
Some may not declare the LAQC ownership to the bank, but it takes just a quick look on line at the companies office web site to check up on that, so you take a risk of the bank(s) finding out during your loan application & getting upset at you for not declaring all your assets & liabilities.

The other issue is that the first bank can ask you to repay all the proceeds of sale, not just the 45% (or is it 55%)you have in the first house, so you may not end up with any cash from the transfer, that you were expecting to use for the deposit on a new place.
If they are aleady concerned about valuations, then I take it that your 81% position is actually lending to asset ratio, not your actual equity(unborrowed) value in the properties. If you truelly have 81 % equity in all your property, ie only 20% borrowed then you definitely need to be talking to another bank or broker as suggested above.

You really only want loss making property in an LAQC.
If it is profitable, a trust is often the better place for it, as it isolates the property from you

[Taurean]

Watch the desktop valuations, some banks won't accept them. I had this problem with Westpac

[kiwi_crusader]

sorry, should read 81% borrowed. hard night, crusaders won.

seeing mortgage broker on tuesday. have found a three bedroom house with a huge dinning room which i'm planing to turn into a fourth bedroom.

rateable valuation $291000
selling price $250000
purchased for $230000
rental assesment $350-$360

what does everyone think about loading up a credit card to get deposit and then going back to the bank in six months time with reg valaution. c/card transfer interest rate only 5.95%. i've read this in one of olly's books.

you guys are great, thanks for your time.

[outspoken]

I suspect your bank is looking at Total LVR (loan to value ratio) and they are uncomfortable with increasing this above 80%.

example: you have 3 properties.

Property 1: Value 180,000 Loan 100,000 LVR = 55%
Property 2: Value 100,000 Loan 100,000 LVR = 100%
Property 3: Value 100,000 Loan 100,000 LVR = 100%

Total Value 380,000 Total Loans 300,000 Total LVR = 78.9%

I also suspect this is why they will not release the security of your property with the equity in it because they have them all cross collateralised. I.E if you remove the 180k valued property and loan to a second lender, then the first lender Total LVR of 100% and they wont stand for that.
I guess you already know all this?

That's the main reason you can't borrow any more money: You don't have any/much equity.
The second reason may be your servicing? I don't know, you haven't given details

As for using a CC for a deposit, yeah maybe in a rising market where you have exceptional cashflow and a good chance of it going up in value.
In this market, I think it's crazy, but that's just MO

[mortgage broker]

what does everyone think about loading up a credit card to get deposit and then going back to the bank in six months time with reg valaution. c/card transfer interest rate only 5.95%. i've read this in one of olly's books.

you guys are great, thanks for your time.

This sounds like a bad idea. Try reading the newspaper more and old books less.