buying investment/rental property under a family trust

Hello all,
i contacted my broker today about buying an investment property under a family trust.
Which i was to believe is possible (when i last checked 2 years ago)
but this is what he responded with...
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This is the general policy from lenders around Trust borrowers:
Non-Trading Family, unit and hybrid trusts, where the trustee must be an individual, or a company where the beneficiaries are individuals if:
- the trustee will not claim any rental income, tax deductibility or negative gearing from the property being purchased; and
- the trustee is an individual and one or more of the beneficiaries will reside in the property on a permanent or periodic basis; or
- the trustee is a non-trading company and the beneficiaries are individuals, and one or more of the beneficiaries will reside in the property on a permanent or periodic basis
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Is this generally true?
Is it not possible to buy an investment property under a trust with most lenders?

 

Even before all of that, why do you think it's a good idea to buy a property in a family trust?

 

That is grammatically strange what is the broker saying?

 

To assist the Deputy Commissioner of Taxation meet their revenue target for land tax.

 

easier money flow with money coming in from properties and a business the trust owns. And then distribution.
The trust is already in place to manage the flow of profits from the company. These profits will also be used to purchase the properties.

 

I don't think what has been posted here translates to 'it's not possible to buy under a trust with most lenders' - because that's not true either.
I suggest you pick up the phone and speak to your broker

 

hello,
that is correct it is possible to buy under a trust with most lenders, but i am asking about buying a rental/Investment property under a family trust.
As per what the broker said, it is not possible if the property will be purchased and used for rental income. Unless a beneficiary lives in it, which means it wont exactly be an investment property for rental income.
So in short, i am wanting to know if anyone else has purchased a property under a family trust with the sole purpose of the property being for rental income and an investment.

 

There are no issues in doing this with most lenders - some lenders like Qudos don't accept this but most lenders accept this. This is applicable wether the trust as a corporate trustee or individual trustee/s.

The only major restriction is hybrid trusts but any other type of trust is fine.

 

thanks, can you give me some lenders that you know can do rental/investment properties under a family trust? i would like to call them and check.

 

Lets break this down

The broker doesn't say (may have left out a few words typing quickly) but it seems they might be saying lenders will lend in these situations.

This is strange perhaps.
No trading trusts is generally correct but some lenders do lend to trading trusts too.
The second part is the strange part. I think he means the trustee will not personally claim these costs. Trusts would declare rental income as income and claim the rent like all tax payers would. If the rent is negative after expenses then it would be negatively geared.

This also doesn't make sense.
The trustee might be an individual or a company - the lenders will lend to either.
Generally no beneficiary will reside on the trust property in most cases, but they could. Perhaps he is saying they won't lend in these situations, which would also not be true.

This doesn't make sense either.
In nearly all cases the beneficiaries of a discretionary trust would include companies. This doesn't change things with lending.
Again there is no need or restriction, on the lending side, with a beneficiary residing in a property being financed whether permanently or periodically.

In summary, what the broker wrote doesn't make sense.

 

You could call any bank or lender and ask - except Qudos.

But what are you going to ask?

 

Thanks Terry,
Maybe the issue is with borrowing vs ownership.
What about the borrowing, is it possible for the trust to make the application for the loan to borrow the money. with the trust beneficiaries as guarantors on the loan. Then the trust to own the property which will be rented out (not to beneficiaries).

 

about 80% of the trust purchase applications I do are for investment properties...

 

good to know, thanks.
And who is the loan done out to? the trust or the beneficiaries?

 

neither, would be my guess. A trust doesnt exist as a legal entity and the beneficiaries wouldnt be owners?

 

So who would the loans be done out to when all the people buy investment properties under a family trust?

 

What is the issue there.
Remember a trust is not a legal entity, it is the trustee that is the owner of the trust assets and the trustee that will be the borrower. A personal guarantee would be required by all directors, but not usually beneficiaries.