Strategy: Buying Investment Properties in 1 name only

Discussion in 'Investment Strategy' started by Terry_w, 9th Nov, 2015.

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  1. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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  2. J&B

    J&B Member

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    Thanks @Terry_w so based on what that link says, it looks like the OSR gave me incorrect advice. is that right? [ i ask this obviously understanding that your answer is general in nature and I shouldnt rely on it:) ]
     
  3. J&B

    J&B Member

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    actually i realise i am still confused, as my situation is I think different to the situation in the link provided. If i own a property jointly - then I see that I am considered "1 entity" together with my joint owner (ie as you have set out in your post). But if I also own a property in my own name, then is that considered a separate "entity" to the "joint me+hubby entity"? I think thats what the OSR were effectively saying. But I cant work out how to get to the bottom of it.
     
  4. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    Yes a joint owner is assessed as if they were one person. There is then a separate calculation to take into account their other property including the share of the joint property
     
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  5. J&B

    J&B Member

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    ok great, many thanks Terry! Much appreciated
     
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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Always think of the next property
     
  7. Cactus

    Cactus Well-Known Member

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    @Terry_w I read vic labor gov are looking at abolishing the exemption. Will put a dint in my future plans.
     
  8. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    Yes unfortunately but only for non main residences
     
  9. Mac Fields

    Mac Fields Well-Known Member

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    Thanks @Terry_w , 'non main residences' = investors?
     
  10. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    I haven't seen the legislation, but it would probably be stamp duty on any transfer between spouses for a house that isn't the main residence- which would mean investment properties, but also holiday homes.
     
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  11. arorah

    arorah Well-Known Member

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    We have a PPOR in joint names with loan in joint names too. We want to access its equity to buy IPs now. Would it be better, to buy it only in my name and having the loan in my name too given the fact that I would be taking a break from work in near future.
    This would mean, if the loan is only in my name, then it wont affect hubby's serviceability and when I am on break, he can get a loan in his name.
    Secondly, if I am not working, this would mean higher tax benefits?
    Sorry to sound so naïve, still learning.
     
  12. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    See above. This is what the whole thread is about.
     
  13. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    Just thought of another reasonL

    Limits Guarantees
    If you want to provide a security guarantee to a child it would be best if only one of the spouses did this and this would only be possible where one was the owner of the property.

    See the trouble happening in this thread:
    Mortgage from hell
     
  14. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    another

    Cash Flow Crisis
    Expanding on the asset protection aspects where each spouse owns a few properties each if they suffer a cash flow crisis and are on the verge of going under what they could do is to sacrifice one of them rather than both of them going bankrupt.

    All the incomes could be directed to the payments of the loans of just one of them and the other person’s loans left to run. (have to consider the clawback provisions of the bankruptcy act too)

    This way one of them maintains a clear record and they only lose half of their assets.

    When both spouses are joint borrowers it would not be possible to sacrifice one of them to the bankruptcy gods because they are both liable for the debt. Where the properties are jointly owned then both will need to be on the loan.
     
  15. Blueskies

    Blueskies Well-Known Member

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    Hi @Terry_w I liked the theme of this thread, and convinced myself that the next few properties my wife and I buy should be in individual names. Have had an uphill battle with it since. Went to WBC to release equity for deposits. For equity releases in either name they required the other partner to go income gaurantor. Amounts were not even that large (3x50k splits, two for wife, one for me)

    Have now taken these deposits to broker for IP loans and have been advised that "you will need both of you on all of the loans to meet serviceability requirements" -although the properties can be on individual titles. Both my wife and I work, I don't understand how we can qualify for >$1M worth of loans in joint names, but not 2-3 x $330k loans in individual names?

    Am I missing something?
     
  16. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    Yes, for borrowing 1 + 1 = 3

    Servicing for 2 individuals jointly is much higher than 2 x each individual separately.

    This is because of living expenses and the way the serviceability calculators assume a person is spending money each month.

    I think it is still a good strategy to buy in 1 name only for all the other reasons, but when servicing is tight you might need 2 on the loans still.
     
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  17. Blueskies

    Blueskies Well-Known Member

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    Thanks @Terry_w , makes sense.

    Problem with this, (and please correct me if I am wrong) is I assume buying homes in one name on title but with joint names on the loan means that only 50% of the interest would be deductible? I.e. my wife is earning 100% of the rent but only able to claim deduction for her half of the interest bill?

    My plan currently is to continue this path, keeping one person on each loan, with the second person as income guarantor but not directly on the loan application.
     
  18. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    This is incorrect. 100% of the interest is generally deductible where 2 on the loan but one on the title.

    Tax Tip 79: Interest Deductibility for 1 on title 2 on loans Tax Tip 79: Interest Deductibility for 1 on title 2 on loans
     
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  19. RetireRich101

    RetireRich101 Well-Known Member

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    say you vary property ownership structure in TIC(?) when buying, so that:
    • Husband (high income earner ) 1% ownership
    • Wife (low income earner ) 99% ownership

    What will the the impact on:
    Borrow
    Would lender don't care of the ownership, and take the combined income from Husband and Wife?

    CGT
    If the investment property is sold in the future and after expense and 50% CGT discount, there is 100k profit..
    Would $1k of this profit added to Husband income and $99k added to added to Wife income?
     
  20. Terry_w

    Terry_w Broker, Lawyer, Tax advisor, Debt Recycle advisor Business Member

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    Borrowing will still be joint so no effect

    CGT is based on proportion of ownership
     
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