ARE TRUSTS "REALLY" THE SECRET TO GROWING A MASSIVE PROPERTY PORTFOLIO?

Oh nice save Aaron. I think you hit the recording button appropriately there and Good evening everyone.

Recording in progress Absolutely I try, I thought I'd try my, my hand at.

It and hello to everyone out there. We'll just check we're coming through nice and clear here. Can someone please let me know say hello in the chat?

Oh, good evening. Hello in the chat. There we go. Now we've got some howdies and hellos.

Oh nice, I like it. We've got an active chat tonight Aaron.

Oh I love an active chat. Bring, bring in all the questions on all the chats tonight.

Now while we've got a moment here and we're just letting some people in and letting their connections getting together here, let me know in the chat are you someone that is already using trusts with your property portfolio? So give me a yes if you if you are using trusts and a no if you are not. Well I'm seeing a lot of no's Aaron. Seen a couple of yes, not yet. I love that we've got a few yeses coming on the fence.

You know that other question that people ask at the beginning Charlie, like anyone know, not know why they're here?

I don't love that as a question.

No.

Do you think someone just like accidentally is like hey I just, I just kind of rocked up.

Maybe, maybe.

Trust me, it's a good mix. What I find interesting in this one particularly Aaron is like there's a lot of people that have said no. So for the people that have said no, what are you hoping to learn specifically about tonight? Where that might be a yes for you or are you just here to confirm your nose? Give it, give some people a chance to get some. Why I should have one that's a great one. A lot of people are considering someone's based overseas. It's an interesting situation we got there. Great question Martel. I wanted to know if it's worth it for us or not. Great answer.

I feel like I've got that question somewhere in the next few moments.

Pros and cons methods of setting up. We got some great ones in here.

I love it.

All right, well let's, let's be respectful of the people that have arrived on time and thank you for those getting involved in the chat Aaron and myself and the SMBT love to really understand what people are getting, wanting to get from these sessions so when we put them on we can make them as value packed as possible. Right. So I think this one is particularly juicy topic, very, very topical in recent times as well. So Aaron without further ado, man, let's jump into it.

Yeah, let's. So our trusts really the secret to growing a massive property portfolio. So as always, we have to start off with a general advice. Disclosure information is provided under General Advice. Any advice contained in this material has been prepared without taking into account your objectives, financial situation and needs. Before acting on any of this advice, you should consider the appropriateness of the advice having regarded to these matters. That's pretty formal there, Charlie.

That was super formal. I'm even going to go the double disclosure on this one tonight on this webinar, guys, or this masterclass as we like to call it, we're going to get into some pretty juicy and spicy topics. We know trusts are a very hot topic in the property community. However, like they can also be an area where you can do damage to yourself if you don't know what you're doing. And I firsthand, my very first trust I set up, we actually had to scrap and not use because it was set up inappropriately. It was the wrong structure for us. Now the saving grace is we actually got advice from professionals who were able to direct us and help us come good on that. So I want to make a very important case here is like some of the ideas we're going to discuss tonight you're likely going to like and enjoy and potentially want to act on. Now before you do, please make sure you speak to professionals who can take your circumstances and make sure that it's actually right for you. If you act on the information in this class tonight and don't seek out professionals, you probably deserve to lose your money. In all honesty, because it's not the way we would recommend doing things at all. So play it safe, get involved in the discussion, ask questions, but please make sure when it comes to getting your specific circumstances looked at, you speak to professionals like the SMB team, an appropriate accountant, even a potentially a trust lawyer or financial planner as well here.

Perfect.

Cool.

So who are we? Other than two guys that are asking lots of questions and telling everyone to get some advice?

Absolutely. Get plenty of advice. Well, I'll kick this one off, Aaron here. So look, I'm a, I'm a property investor. Like I've managed through the help of the SMB team to amass quite the portfolio. And to this point I'm just quickly adding it up in my head. But currently I've got about $11 million in property Australia and I wouldn't have been able to do so if it wasn't of the use of different structures or the advice given by the SMBT SMB team on how to navigate those structures or sorry structures bit of a tongue twister there. So very fortunate to be in the position. I am and really passionate property investor hence why I do these things from here. But that's a little bit about me. And who are you Aaron?

Well I'm. I'm a. Basically I'm a mortgage broker but I'm also have done over $300 million in loans for property investors. Used all the structures, all the different things that come along with there. I can tell you straight. Lots of, lots of people can completely stuff this up. Some people watch a half baked video online of a mate talking about unlimited borrowing capacity and think they've cracked the code. But what they've actually missed is this strategy and mistakes in this space especially in trusts and things can get really expensive and lending in. So we're here to cover tonight not the fluff, not the theory but real strategy from real people that have actually done it and scaled it. So we are strategic mortgage brokers that we specialize in the property investor for lending and I would go to say that tonight we are going to talk lending in the trust and company and personal name. We're going to leave a lot of the accounting stuff to the accounting. Any specific advice around types of trusts and things because the lending space is huge compared huge in this space to talk about and that's why we're here tonight.

Awesome. So definitely not going to pick any locations then are we? Well let's rule it out actually let's leave some room.

There you go. Cool. So let's, let's kick off on getting on the same page. So there's a couple of different things to think about here. Personal and joint name. So we can own property in a definition of owning it in our own names or joint names. So whether it's our own place and we got a couple or it's our own self that we want a place to have investment or owner occupied companies have a separation of legal entity and they're usually controlled by the directors and shareholders. The company becomes the applicant and you as the person that is directing it to what it does. And the trust is another is directed by the trustee. So we have two types of trustees the person or the company. And for lending purposes we much prefer the company as the trustee and the trust is just a funky document that directs how the money is going to and the investments are going to be made. It is the trustee that controls everything. Now I think that was a little bit Boring there, Charlie.

To sum it up, I think there's three ways you can buy a property in a personal name, in a company or in a trust, and the different utilization of those entities, they all have their pros and cons, really shape what you can do with borrowing and ultimately what you can do with property in Australia.

And for people that are thinking about that smsf, that's just a big funky trust structure and a couple of companies thrown in just to mix it all up.

Yeah, awesome.

Cool. So itrusts really worth it from a borrowing capacity point of view. Trust can be ultimately a way, that is an injured trick to be able to expand borrowing capacity far in excess of what you've been able to achieve now. But it comes with its own, own risks. It's not for everyone and there are specific circumstances that can come into it. So trusts are actually going to cost some money to set up and to operate and they'll come with their pros and cons related to how you might want to go after one or the other. But in collaboration with your accountant and other professionals, this is something that can help you control a lot more assets and get around some of the ever increasing income requirements you might need if you're going to continue to invest in your own name specifically. And there's been some really interesting lender updates in the last few months on this topic especially.

Oh, hasn't there? Well, I know firsthand, Aaron, if it wasn't for the utilization of trusts, I wouldn't have been able to create the property portfolio I have. So I, I've seen them firsthand and just how powerful they can be when it comes to lending policy. But there's like a big magic thing behind it that I think people need to really consider and I think that's actually your next slide from memory that's.

Should you use a trust structure?

Yeah, well that's like a trust is a trust. Like it's very like, how can you put it? Like it just is what it is. But what makes a trust worth using or not worth using is really someone's personal circumstance.

So this is where a couple of ideas can come in. Well, one thing is, if you have been an employee all your life, can you use a trust structure? Absolutely. So you can use a company and a trust and things like that. We have a lot of clients that come to us as investors that are employees and think, oh maybe I can. They can't use this trust structure stuff, but they definitely can and that can open other doors to the banks as well. We can only do trusts. If you have. If you're going after residential property and we're just using standard servicing, you have to have borrowing capacity left. You can't run it out. Do not listen to anyone, accountants, professionals, brokers that say you should run out your borrowing capacity before you start considering this. Because the equation is it's your personal borrowing capacity plus what you're doing in the trust to be able to get the residential property or the full dock commercial property. There are some other products out there that can help you bypass that a little bit further, like lease dock. Should we use trusts? If you've got your cash flow circumstances around. If you've, if you can manage properties quite well on the cash flow side of things, not just because the bank can tell you you can buy money, that's a really cool thing. If you can generate your deposits, understand the cash flows and how the holding power works for the trust that all comes into it to go. This might be something for you to think about. So you've got some borrowing capacity left, you understand the cash flows and the holding power of property, you can generate deposits, you can manage the complexities of trusts. You don't mind talking to an accountant occasionally and paying some extra fees. I believe trusts is something that you should be checking out to see how that would allow you to amass a property portfolio that's larger than what you have now. Cool. So to go through a couple of things related to the three areas that we can invest in and what's, what's a benefit and what's a con. And we'll start with a major topic that everyone knows about and everyone I know has either bought their own place or a place in their own name at some point in time in the property space. So with the personal name, your pros are you have pretty much all the lenders available to you. Some lenders will restrict some of the entity stuff so you actually have the broadest lender access. If you put it in your personal name, the gearing benefit that you get gets added back to your borrowing capacity. Yes, it's got some other tax things, but we're going to focus on the, on the borrowing side. So your interest add back that you have gets added into the serviceability calculator of the banks and your borrowing capacity increases. In the main, there are some exceptions, it's lower ongoing costs because it's your own name. Quite simple, straightforward, it's highly recourseable. The banks can go after you if, if there's something goes wrong. So it's really got a lower cost associated with the tightness that the bank has on you. The cons on understanding borrowing in your own name is that your borrowing capacity management will be limited. The example of that is if we have $100 of rental income most banks will shade that down to 90, $90. Then they're going to want to know what the property management fees are interest, insurance rates, water rates, all that sort of stuff. So our $90 that gets added to the borrowing capacity just shrinks out to nowhere. So our borrowing capacity gets limited. More, more buffers are in there. Living expenses are minimum. All that sort of stuff gets in there. It's harder to shift ownership later. So when you own property in your own name and you want to move it to an entity it's. It's selling it to another person so to speak Even though you control it and you've got full personal liabilities of the debts they're going to come after you for everything in your personal name. Yes, there is some liabilities to your person when you borrow in a company or trust.

All right, so let's generally speak about this. When is it common that people will use their own name then Aaron, like you mentioned one before which is like a ppr is there any other own.

Place you're utilizing the first home owners benefits all that stuff has to come into your own name. So if you. If there's someone out there looking for their own home to save on some stamp duty and things and whatever they want to do down the track in a year's time your owner occupied and first home owners benefits have to come into this area. If you are helping a family member out or you're gaining help from a family member under a guarantor structure like a family guarantee structure we've had a lot of examples where clients have come to us that they might have been divorced and they've now not going to be able to afford a Sydney Melbourne market they have a few. They maybe have 40 grand in their bank account but mum and dad is happy to go guarantor. You have to the person receiving the guarantor and the piece of person being a guarantor has to have that in their own name. You've got high. You might if you've got not much cash reserve buffers and you're getting a highly negative gear property it might be a consideration to put it in your own name versus trust. When we're apportioning debt between people so some banks policies allow us to apportion debt between one person and another. And when you need a lender that you only qualify and they don't lend to companies and trusts.

Yeah, some great circumstances there. In my own case, I know that there's one property in my portfolio which is quite negatively geared and we did consider putting it in a trust but when we mapped out the tax benefits and all the rest, it was far better to have in my own name there. So that's been a really big win. Another one that's kind of interesting here is that if you were to mistakenly buy a, let's say a house you're going to live in and you put it in your trust, you now have to pay land tax on the place you live in, which you don't if you buy it in your own name. So this is where it can get a little bit tricky. Right. Because like right place, wrong structure could cost you a fortune.

And the other one is around when you are buying your own place and things having a bit of planning and foresight. Like if you've personal name, you can get away with a lot of stuff that could go wrong with the wrong property and things in your own name versus the other structures. But when you put owner occupied in a company or trust or you choose the wrong property or you didn't have the foresight or the plan to put the right property in the right spot, that that can hugely impact your cash flow and your tax position.

Yeah, I'm with you.

Yeah.

All right. So personal. I think a lot of us would understand that. Being from the chat, it seems like a lot of people have already purchased properties in their own name or investment properties in their own name. Let's jump across to the next one.

Cool. Companies, some of these things, companies and trusts may have the similar crossover but with companies, the pros are you've got a clear separation between personal and business. They actually ask you to open an account, whether it's an offset account or a business account that has no fees hopefully for your company when you open it and you are the director of it. So you control the company. So the person that becomes the applicant is the company which is this document in front of you. You've got. It can be combined with the trust structure which is a common thing. We find a company as trustee for that big. That word that goes on a lot of contracts that we see is like ABC Proprietary Limited ATF as trustee for. If you haven't heard that before, we have access to other lease dock lending. Now there are is access to lease dock lending which is a commercial product in outside of companies but it's most commonly found inside companies because it is an area if you if you're looking for anything that's got a bigger mindset of unlimited borrowing capacity Lease Doc is where it sits. It's just that no one has unlimited deposits. It's easy to transfer shares than the property title. So the property title is in the company's name. The company actually has shares and there's a whole range of things that you can change around there. Changing the shares too much will have some consequences to lending especially if you change it into from minor holding to a major holding. Companies can retain profit year on year whereas trusts can't. Neutral cash flow properties can be a good example of putting in here. And there is a tax rate on companies that's a flat fee versus your own personal tax rate as well. Cons we got lower borrowing capacity due to in the main most lenders will not allow you to add the negative gearing back. I do put a caveat on that. There are a couple of lenders that will actually allow you to do that. But it's not from a tax point of view. It's from a lending point of view. Directors are often required to give personal guarantees. So the lender the company doesn't own anything. And then you can run away and not pay the debt. The company when there's a loan involved the lender will go after the person. The person will be tied in to the debt that the lender gets. So from an asset protection you can never get asset protection against the bank and then set up an ongoing costs. Now if you've are you're an employee and you've got an investment property and you go to the tax accountant you might only get charged anywhere up to $500 or a bit more depending on the complexity. But when you get into companies and things that can accelerate upwards from a thousand to two thousand from there depending on how many you have and what your plans are there. I go down the line of I have a description of confused companies and trusts where you might confuse things with your trading company if you're self employed into and a holding company. So you might put some properties into your trading company and your trading company might put some fees into a holding company. And when we assess those for lending purposes with particular banks they can get a little bit funny about what's going on there and that can change the whole borrowing capacity range. When you are confusing companies with trading or management fees to holding companies. So there is particular things to set up and collaborate with Accounting on these types of structures.

Oh, I love it, Aaron. You can see when you go from personal to companies just how more complex it gets. And I think you mentioned one of the really key points there is just the expenses and costs with setting up companies to hold properties. Much more expensive than buying in your personal name. Much more expensive. So there's a lot of compliance that goes into that as well. But just a couple of notable ones I want to retouch on with companies and correct me if I'm wrong on this, but you actually don't get the CGT discount. No. So in our personal name and in a trust, if we buy a property and hold it longer than 12 months, we get the capital gains discount which if you, if selling property is a part of your strategy is can be a massive amount where in a company that doesn't exist. So I think that's a really big consideration for people where you could go wrong and if you've got to sell something that could be very, very dangerous or detrimental. The other one you mentioned though that I didn't truly appreciate until you explained it to me is the ability to retain earnings. Right. So if you're someone trying to grow a property portfolio and let's, in this example here, let's say you've got a commercial property in a company and it's spitting out a lot of cash flow, you could be getting taxed quite heavily on that. Depending on how the company is doing, where the ability to retain earnings could be rather than getting taxed at 47 cents, you might be able to get that down to like 30 which could be massive when it comes to holding a property for the long term.

And the main thing with companies and trading entities and in the self employed space is if you own how your money's flowing from your trading to a holding company, or a bucket as another one's called, or a company that owns a property if you're the director and you own all of that, the bank can have a look at all the income that's associated with that, not just a percentage of it and things like that. Especially with trusts and things where you have to distribute money that can get into the lending space that if you distribute it to a non associated person to the home loan application that can get a little tricky and which lenders we're going to go for or not go for depending on the setup of the trust and things like that. So not to get too much in the crazy tax area, but anything that you set up can have and will have an impact on your borrowing capacity.

Is there any circumstances where companies make a lot of sense to use the.

Generally speaking long term holds where you're probably not worried about the CGT stuff, where you're wanting to have it, just sitting there doing things for the long term and spitting off money? Most commonly I do see probably a trading entity with a bucket company holding the money to be able to lend to your property empire for surplus profits off the trading company. And then we see a lot of trusts. I probably see comparatively to companies owning a property to trust only a property. We see a lot, a crazy amount more trusts owning companies than we do trusts owning property than we do companies owning straight properties.

If someone's doing developments, for example, let's say they've got a business in developing, that'd be one of the areas where this is commonly used as well.

The flippers, the developers, the ones that are holding it, they want to have some, they want to manage some of the GST and other things like that that comes into that. The GST side of things is in a very interesting one of how it comes into lenders too. If you go and get a land and you build a property and you sell it within a certain period of time, there are some lenders that want to take into account the GST off your valuation when you refinance and things like that too. They're very limited lenders that do that. But it is another thing that tax does cross over into some of the lending policies too. So trading, trading, trading companies that trade with building and developing can be in straight companies to help with that management as well. And even flippers we've found will buy in straight companies too completely because you.

Can retain earnings if you were to sell quickly. So it's kind of an interesting game, right? So just for everyone in the chat, and I hope you're still with us, if you're going to buy a property and you were going to do a flip, right, if you bought it in your personal name or trust, you can and you sold it in, let's say six months, you're gonna cop the full whack of there's no CGT discount, so you're just paying full tax rate. However, if you were to do such things in a company, you might actually be able to be very strategic in bringing down the tax rate on shorter holds. So again, this is the nuance of, in my hope of you guys all understanding these structures a little bit better, you might start to see the circumstances when they're suitable or what you're Planning with your portfolio so that you can be strategic on when you actually apply them in that way. So very interesting one around companies. I don't feel like they get a lot of love these days. Aaron. Now let me. Let me know in the chat if you're with us so far. You understand. All right, I get it. I can see there's a way to buy my property in a personal. I can see that companies is another way in certain circumstances that could be really advantageous depending on what type of stuff I'm trying to get up to. And of course my personal situation, we're getting some thumbs up. I like that as well. I don't know how you did that, Steve, but that was fantastic.

And with the development of flippers and stuff, just get your right advice on the accounting side of things because it could actually turn into a nice little thing that we could use some profit before tax and things depending on how you're set up.

Well, I'm not going to pretend I know such things, but I would say that I've seen many people doing things where they're perhaps buying like Darwin at the moment and they're actually planning to get in now really quickly and it's like maybe this type of structure might be suitable for that type of play. Now I can't say if Darwin's a good buy or not or if someone's circumstances but creatively I hope that's what people are starting to get a feel for. Of like. All right, I'm starting to understand this game a little bit here.

Cool. All right, we'll go on to the.

Go to the big dogs.

The big dog. Right. So from a learning point of view love that a company is its trustee for it makes it so much simpler. So common things here the pros are there's clear separation between personal business. Obviously we can continue on doing the lease doc lending here income can be distributed to beneficiaries. Now the way that this has some benefits and problems with lending is who are the beneficiaries? Are they subject to the application we're doing for this trust? All those things can come into it. Some lenders will send the trust deed off for legal advice and charge you for that at certain different lending levels. I think it was like CBA. If you're over $500,000 with a lending and a trust, they'll send it off for vetting with a lawyer. Some lenders only take simple trusts deeds and they just get them checked off quickly and move on. And if there's anything out of the Unordinary, it's, it's, it's a no go. So that's their tax and estate planning stuff. That's for other professionals, but that's there too. The cons are there's lower borrowing capacity due to no negative gearing except for a couple of lenders that actually add that back in. Doesn't, doesn't affect your tax thing, just affects your lending borrowing capacity because lenders actually have to compete in this space. Less lender options like there are some lenders that don't, don't want to loan to trusts. One of them in particular bank west will not lend to trusts. So there you go, no bank west for us. In the trust land trustees act strictly to the trustee. Our preference for lending is a company. The setup and ongoing costs usually are a lot higher than the companies that we just spoke about. And just be careful with the confused trust thing where you can convert a holding property assessment of using rent and property expenses and you, if you combine it with a trading company, you now are going to change how the banks look at how your borrowing capacity works if you're going to mix them together.

Oh, I love this one, Aaron. Now before you go on here, there's some fantastic questions coming through in the chat, like fantastic ones. And I will make sure we have some time for Q and A at the end and we can go on any specifics in talking to these guys. But I will say for those of you that are asking specific things about what's best for you, I think one of the best things you could do is book in with the Strategic Mortgage team and they'll go through your circumstance and the content we're discussing here and they'll be able to say, well definitively a trust is a good idea for you or it's not right or a company might work for your situation or not. Now, due to the nature of webinars, we can't go into everyone's situation. I've just put a link in the chat. If you're someone that wants to grab a spot with the strategic mortgage bringing team, they'll be able to help you navigate that and go through it. And I will say grab on early because we tend to get quite a few people that want to get a call. So if you're interested in that, there's still some good spots on the calendar. Now coming back to trust here, Aaron, are there any more points on your sheet I want to make sure we're covering?

Not on my sheet.

Unless you got, I got so many, so many things. To talk about here.

Okay, go for it.

All right. So I, I think one of the things I just want to really highlight is someone that's like, I think I have three trusts currently, three running. And like, one of the things that I think does come up quite often with this is like, or people don't necessarily understand is just that, like, there's quite a substantial cost in setting up and then also maintaining trusts. Right. It's. When you compare it to personal, it's quite a different game in that way. So for anyone that's even considering a trust or wanting to go down that path, they really have to understand that at times you're going to need justice of the peace, at times you're going to need lawyers to look at documents and set up things like trust deeds. And you're also going to have the ongoing accounting costs that come with that. So it's not a free ride to get the benefits of trust when it comes through that. And my eyes weren't as open as they should have been when I started down this path, but I think that's one of the things we really want to highlight here.

So a couple of things on expanding on that one, Charlie. A couple of things that we've done in the team here is that I know when I first became a broker in 2012, I became a justice piece straight away because of some of these nuances that come into that area so that we can give the clients a better experience. The other thing that comes into trust loans and company loans and even self managed super fund loans is a requirement for independent legal advice at the loan document stage. Not quite commonly talked about. If you are going down this path of looking at these areas to borrow in, please make sure you've got the right broker and the right people around you. Because if you get stumped at the end and you get these loan documents and now you've got to see a lawyer, you've got to make sure your broker's on top of that before you even start and make sure there's a process to be able to get that. I've seen that cost can go out of control too. If you customise these trust deeds and some documents related to these entities. That can blow your costs out of the water as well.

Oh, completely. It really can.

The other one related to borrowing capacity, like should you own a trust, one property in each trust? Well, there's collaboration with the accounting side, but also there's a thing about just seeing where is your borrowing capacity. It all comes back to anything related to Your personal ownership, company ownership, trust ownership, self made super fund ownership all starts with your borrowing capacity. If you don't know what your borrowing capacity is, that's the place to start. Related to should I do more than one trust, Should I have one, should I have none? And then once you know that you can achieve the borrowing, you should go after accounting and other professionals to collaborate with.

We've got a great question in the chat here, Aaron. Do you hold multiple properties in one trust or do you use separate trusts? Now again I think circumstance comes into this. There will be times when different things make different sense for people. But what do you generally see?

You've got the camp of the one property per trusters out there that go no, I'm only going to have one per trust, right? Then you've got the people that might pair more negative with a more positive. That could be a way. There are people that have come to us that have a trust strictly for commercial and a trust strictly for residential. There are people that will understand what their 100% of borrowing capacity is worth themselves plus their trust and they might only go to say 60 or 70% of their borrowing capacity so that they can actually come back to that trust. And then there's the people that will take in the other other adjuncts where if you have too much property in one state in a trust that can be damaging. Except for a couple like there are a couple of states that will amalgamate your own person and trust and companies together. And there are states like Victoria that have not much tax free threshold anyway. So having that tax overlay on Hammond Trust you should have could come into it as well as the borrowing capacity piece to make the accurate choice.

I'll share my thoughts on this or my experience. So this is again in my circumstance and what's worked for me. So what I've personally done is I've taken the pairing approach. I've for example taken a negatively geared property with a high growth profile and then I've paired that up with like a unit block or a triplex and I've put them in the same trust. And you go why would you do that? Well the reason for that is now my trust has is neutrally geared so because of the high yielding property is offsetting the low yielding property and then that's the thing that makes the income on the trust look good so I can access more borrowing. So that's worked really well for me as a strategy. When I've looked at the one trust thing is like I think in that Circumstance there I could understand why people would do it. Like I get that they want the separations but the costs to me just didn't make sense. You would have to be buying quite large properties to kind of justify the ongoing costs against the gains for it to be worth it in that way. So it can become quite complex when you're dealing with things in that way I found. So pairing is the approach I've taken personally and that's gone very well for me in that way.

And, and if you go for the 10, if you go 10 properties and let's just say on average you trust P cost 2 grand, that's a good 10 grand hit. And depending on the type of properties you've got in there, if you've got low valued properties and you're paying ten grand a year on extra management on top of everything else, that's a, that's a really interesting cash flow, mind boggling effect there.

Well see that's the point Aaron. Right so if you think about this in that circumstance there you've got ten grand of expenses, right. Where if you've got a couple in your personal name and any of those properties are negatively geared, right. Well that's actually way more tax advantage so you've got lower costs from not having the trusts but then you're also getting tax deductions on your income so it can greatly affect your cash flow overall by utilizing different ones of these in different ways. Right. Or in some circumstances which I believe Queensland is the state, don't hold me on this but separate trust might give you a separate tax free threshold on land tax. Right. So again that's a circumstance where I look at it and go a trust is a really handy thing to do because it's setting, setting you up for a very advantageous land tax strategy which I think is, is quite cool.

And for the people that are self employed out there and they have a straight company and the shares of that company that they trade in for, whatever you do in your niche are owned by a trust. So another company in a trust that the shares are 100% owned by that trust to be able to distribute profits and try, try to leave that just for owning the shares of your trading company. Let's not confuse that trust. If you're going to go and borrow money for you can borrow money and hold property in that trust but now we've got profit distributions and other things that the lenders are now going to get confused especially if we need to use some lenders that are a bit more favorable for borrowing capacity?

Oh, definitely. Now we've got quite a few questions coming in about how does a trust actually create more borrowing power? I believe that's actually on the next slide where we're going to talk about this. And, and guys, this is one of the things I think everyone needs to understand when it comes to trust and borrowing. It can be complex in the beginning to get your head around it, but once you get it, I think you can start to see the power of why this could be so good. So let's go through this. I think this is going to answer quite a few of the questions in the chat and then we can think about coming back around to some of these as well. Aaron.

So a big question that comes out there. We have everyone talking about unlimited borrowing capacity and all this stuff out there. When if you're looking at the lease dock lending, absolutely there is going to be a far greater unlimited borrowing capacity in lease dock lending. But do you have enough deposits for that area which can range up to like 40% of each property. But is trusts actually able to give you unlimited borrowing capacity? Well, I would say we don't have unlimited lenders and we don't have unlimited unlimited capital. But what they can help you with is go far beyond what you can do in your own name. If you break it down that your own name can invest in, then it's you've got your companies and trusts and then you've got self made super funds. Those areas are the areas that will help you over time have a feeling of unlimited borrowing capacity. But the unlimited borrowing capacity is not the problem or not the common topic of conversation. It's actually what you want to do. Where do you want to achieve your goal with property investing? If you had unlimited borrowing capacity, how, how would you structure your portfolio differently? And there's never one size fits all with anything that we talked about like having one one each property or pairing properties together, looking at different states, the lending doesn't change from state to state. When we are borrowing interests or entities, that's where the collaboration of these trusts and companies and things come into play.

So make a really great point there. It's like in that strategy, this is where you've got to be able to get your accountant together, your buyer's agent together and your broker and go, hey, how does this all play hand in hand? Because like you know, from the tax side of things, if your accountant is looking at that, they might strategically be considering different options than the buyer's agent as an example, and then borrowing may or may not work for that as well.

Absolutely. So there's a couple of things that have happened recently. So I wanna, I wanna give some little updates on what some banks have done.

Let's do it.

All right, so most people, if and if you haven't heard it before about trusts and companies, Macquarie bank has been a big bank that's allowed us to do this thing called self declaration. So if you have trust number one and it's profitable, they will allow you to as the borrower to say that they ask you to sign something funky off when you get the loan contracts. The other thing that they functly do is they get a little amnesic with their own debt at times. So when we go through the debt solo silo thing in a moment, that's an interesting thing that Macquarie allows. They get amnesic on their own debt. Update on CBA. CBA's now come out that you as the borrower can tell us that your trust is operating positively. And another one that came out, the Westpac group, which incorporates St George Westpac, bank of Melbourne Bankers SA has come out that it's a self declaration around what your trust is doing when you borrow and put property in there. So we have some big major players coming in to make it a little bit more lenient on the borrowing within trusts.

We might have to explain this one a little bit more in depth. So I'll give the back to these guys. So previously if you had a trust, what it used to take is an accountant's letter. So your accountant would have to sign off and say, hey, if you've got a trust, this trust is neutrally geared, positively geared or negatively geared. So it's either losing money, breaking even or making money. Now the change that Aaron's talking about, which is just very significant here, is that you would no longer need an accountant to do so. It would be a self declaration, which means that you as the property investor can sit there and say, yeah, this trust is good, it's positively geared. Now I will say that this policy, I don't know how I feel about it. Right. It actually sounds like, how could I put it, CBA is likely to get a lot of trust lending that they maybe wouldn't have now. But the potential is that there is the potential to do the wrong thing here and do damage is the thing that I'm concerned about. But as investors, this is great news that it's actually getting easier for us to navigate trusts, not harder.

The so then to give you the equation on things, if you as this little person here borrows way too much money, you might be able to manage the cash flows, you might be able to manage deposits, you might be able to build up such a significant deposit, but you won't be able to go to the bank and borrow any more money. Whereas when we go down the line of a company trust here in these bubbles, what we can do is we look at you as the person, so every time we go for borrowing, it's you as the person with your own debts, your own living expenses in your own situation, plus what we're doing in the trust. So we would add the liability, add the rental income that you're doing in the trust. And if you had two, like our little man here, if we had a million dollars worth of borrowing capacity here, and we wanted to buy two $2 million borrowing capacity properties, we could put a million dollars worth of borrowing capacity here. So you plus this one would max out. We could then go, you plus this one here, put another million dollars in here. Because we have these policies with the banks to exclude this debt as long as the rental income minus the expenses is running neutral or positive. To be able to do that, then if we put a million dollars here and a million dollars here, guess what? We can probably put a million dollars in our own name because we can exclude this and exclude this. So where we only started with a million dollars worth of borrowing capacity, we've now given you $3 million worth of borrowing capacity.

All right, let's hold up, let's break this one down. So in this example, the smiley faced man in the beginning on the left side of this diagram, he has a million dollars in borrowing capacity. That's what, that's what he's got there.

Yep, that's all he's got.

Right. So he goes out and he starts buying some properties and he buys them all in his own name. When he gets to that million dollars, he's maxed out, he's done. And that's the image you're showing here of the person bought everything in their personal name and it's all on their back.

That's it.

All right, so in scenario B or the right side of the equation here, we've, we've still got our same stick man down this bottom corner here. But the difference is, is this guy here, rather than putting any debt in his personal name, he's putting all the debt into companies names. So because the debt is technically in a company or a trust, that means that he hasn't used that borrowing capacity that he has in his own name. So when the banks look at this guy and that debt is excluded, which is known as a debt silo, the debt siloed away from him, that would mean that he could continually. Well, this is where the unlimited borrowing power thing comes into it. Technically he could keep doing this till infinity, provided he was able to come.

Up with the deposits and we had.

Enough banks and enough banks, of course. So this is where the magic of trusts can be very, very powerful. In my, in my own circumstances, like I think I would have got stopped out at about 5 million property if I all had bought everything in my own name, I would have really maxed out. But I was able to go well past 10 because of the utilization of these types of structures to keep extending that personal borrowing power. Extending what I could do within a trust.

Absolutely. And that's where the next step comes in that if you are not able to manage your cash flow effectively for your investment properties, that's why sometimes it's always good to put something in your own name to have some leniency is that when you need to manage your cash flows very, very well here and here and when you get up to someone, something like you mentioned Charlie, when you get up to that, four or five properties or depending on where your borrowing capacity could be only one or two or you might have a background in numbers or a really good interest in numbers. Once you've got your cash flows all sorted out and it's just the borrowing capacity hampering you and you've got your deposit sorted out, this is the, this is the next level of investing because it will have a whole range of other benefits other than borrowing capacity in the acquisition phase that you would be in by starting out here.

Yeah, it's such a powerful concept here. Now please let us know in the chat if you, you want us to break this down even further because I feel like if this is all you took from this presentation is the understanding of this concept here is that you stand the chance of being a better investor and better equipped to navigate your own property journey. Now Aaron, there's a great question in the chat here about. We've referenced, you know, trusts in this example but they could be companies or trusts. It just the debt just can't be in your personal name to be able to silence away from you.

So the way I would expand on that, you can have a straight company, PTY Ltd, that owns a property. Specific advice more in the accountant space, the company as the trustee for the trust is the most common thing that I see A lot of the investors come to us, or if they're talking to us and we refer them on to an accountant, or you go back to your own accountant, they will more than likely talk about a company as trustee for the trust because there is an alternative setup that can be a little bit more finicky to deal with with lending, is that you as the person can be the trustee of the trust and all you're doing there is saving a few dollars when you have it as a company as trustee for the trust, it makes it a lot simpler and a lot less questions when we go through the lending space and there's a whole range of other things in accounting land about what you can do with that company as you go forward on that. So you can have yourself as the trustee. But in lending, I would say it's best off considering the company as trustee first. The trusts also have their own thing. You've got unit trust, discretionary trust, all that sort of stuff. That is why you need the accounting advice piece, not the lending side on that.

Now, I got some great questions going through in the chat here is that people are asking, well, what if I've already maxed out my borrowing power? So let's say in your example here, I'm the guy on the left, Darren. I've already, you know, got my million dollars on my back.

I've.

I've only just discovered trusts, which. What do I do now? Like, can I still utilize trusts if I maxed out? Or what happens in that situation?

Well, that's. Well, you're the ideal person to have a chat with us because we find a lot of people will come to us that feel like they're maxed out. We've done some previous masterclasses on being maxed out and five ways to increase your borrowing capacity and a few other things about creative financing Strateg. Because if you are maxed out because you have one bank, let's say you've only got all your lending with Anz and you've gone to Anz. I'm picking on Anz because they don't like to exclude trusts and things. We go down the line of Anz and we're maxed out and we've gone to Anz, can we borrow any more money? And they said no. The. The problem with that is that we've got 98 other lenders to go to that have differing policies to be able to expand your borrowing capacity. What far past what you already thought, you were maxed out in your own name. So once we Start looking at alternative banks that are actually more compatible with investors that can expand your borrowing capacity, get you some borrowing capacity back and then get you on your journey to talk and consider trusts and things again. The other one is that we've talked about. If you run out of borrowing capacity, one of the major companies and trust structures is a self managed super fund. Self managed super fund has the ability to be isolated from your own name, so it doesn't impact your own name. You can use your own name to bolster the borrowing capacity in self money super funds. But self money super funds don't have to have a look at your personal borrowing capacity either. So there are a couple of unique trust structures that can get around that. But if you are maxed out, I would be getting an immediate update with the investment strategic mortgage broker to be able to see if you are actually capped out.

Yeah, so I've just put that chat. Sorry, the link in the chat again guys. So there's a calendar link I've just pasted in there. If you're someone that feels like you might be maxed out, definitely book in. I can't tell you how many times I've heard that people think they're maxed out only to sit down with one of the SMB team and find out that they're not. In many cases the broker you are with just may not be up to date on policy or he's only wanting to work with certain banks and then because of that he doesn't have the extent or reach that someone or like Aaron or Karina or the SMB team has. And you might find that you're not maxed out at all. Like you might not even need to consider trust. It's just that you need a good broker. Now I'll share a little bit here, Aaron as well, because I think like there's an example here. It's like, and I say someone's already bought three properties in a trust, sorry, three properties in their own name. What do they do now? Well, if that person's maxed out, like one of the things you can do when I acknowledge this is not cheap but might be worth it for the journey, can actually move one of your properties into a trust. Now you will have to pay stamp duty and any CGT on gains that have happened. But if you think about it, that might be the best thing you do because it will unlock you getting to property four and five and it's like, would you rather get the compounding nature of five properties over the long term or three so it's an interesting way to think about it. Another one is it might mean you are better off selling an asset in your personal name. And this is something I've done. So Aaron, who I've been very fortunate has been my broker along this journey. There was a property we had in the Central Coast, I think.

Yeah, that was one of the first ones.

Yeah, property in Central Coast. I wasn't too educated on trusts. I bought it before really understanding this and then Aaron was able to help me go, well look, if you sell this property and we take the proceeds, you'll be able to sell this one and actually buy two properties in a trust. So sure, you're going to take the hit and have to pay some tax now, but if you think about it, would you rather that one property compounding or two for you based on this? And it was such an eye opener to the idea that in some circumstances, which is this was my circumstance, which is I ignorantly bought property in my personal name without knowing about trusts, I made the mistake. Someone on the SMB team was able to help me work through how to navigate this to put it right. I think too many property investors stay stuck that they have to hold properties or have to keep things a certain way and it's like well what other options do you have then? And again guys, that's not direct advice to anyone. I'm not suggesting anyone on this call should fire, sell a property or do anything irrationally. What I am suggesting is you should definitely speak to the SMP team if you're someone who's already started buying properties in your own name and then you're going well shit, my borrowing power's running out. What am I going to do here? So very important point.

I've made a couple of really interesting scenarios recently about people that want to continue their. They've. They've got a bit older, they've reduced their income, they want to continue buying properties, they've got a bit of capital behind them and, and conversely I've had clients come to us with say an insurance claim with a large amount of money but no job and we've still been able to find, navigate ways around them to be able to buy and hold properties in a trust or in a company to be able to do need a larger deposit because they need the, it's a lease doc loan so they need the lease to actually cover the debt but they've been able to surmount a large amount of portfolio. One guy that had a $1.2 million TBD claim they were able to buy two, two unit blocks, 13 properties, 13 tenants, wait a few years and those properties gone up in value, They've been able to go back into the workforce and now they're going from being able to invest to now being able to continue their portfolio journey. So there are ways around borrowing capacity that are compliant, that are able to meet your needs. But if you don't have any income, we're probably not going to be able to help too much. If you've now retired or you have a very limited income where you're building family instead of properties, that's a thing. It's a time and a day in buying and borrowing.

All right, let's press on with our slides. Aaron, some cracking questions, we'll come back around to them.

Okay, cool. So how to win restructures, use them at the right time. Don't just go and buy our property. Have a plan to buy not just the first property, but have an idea of what you're going to do for the second property. Have a broker that's not going to just do the transaction for you or a banker that's going to do the transaction. Do have a plan. If you, you need to be thinking about the next property, you need to be thinking about the lender. We as brokers need to be thinking about the lender we're going to put you with and the next lender we're going to put you with so that you can continue your property journey. Always build in your own name, in companies and trusts and in self managed super funds. And that's how we're going to win the long game.

I really hope people can see through going through these slides the way you actually win this is by utilizing all of it. It's just knowing like structures are just essentially tools. Right now I want you to imagine if you're a carpenter and you go into a job, depending on the job, you're going to need different tools. You don't just get out the hammer for everything. Now just going and flat out buying in one structure is just like I'm just going to use a hammer for everything.

Absolutely. Let's give a go.

Yeah. So once you've developed a little bit of education around these things, and I do hope in the chat guys that let us know in the way we've gone through this, are you now seeing there's different times and different ways you would use different structures? I suspect many of you were going, well, if I was going to do a flip or I'm doing a development, I Might consider a different structure than if I'm just doing a buy and hold or if I'm going to do something that's negatively geared or something I want to sell quickly. It's kind of different considerations when it comes to it or if I want to maximize my borrowing capacity. What's the best structures to go through that? Now, we've given you one side of this scenario here where we've talked about the structures. The other side of it is, of course, your circumstances as well. So do keep in mind that the other half is, you know, your income, your current liabilities, you've got a family, all types of things like that.

And think about the other adjuncts, like your accountant. What type of structure, what things would you do set up in there? And even think of your buyer's agent or property partner as you go out into buying the next property. Maybe they can help you assess what you currently have to give you all the, all the information to make a choice on whether trusts or companies are good for you.

Now, Aaron, do we have some time for some Q A? We do see some coming through, yeah.

Let's, let's bring the questions on.

All right, Now, TAM has asked, I want to book a time to speak with you, please. I've just put that calendar link again. So, guys, you'll be able to find it scanned through the chat. Put it in here one more time. If you want to come in and get your borrowing power done, understand which structures are right for you or potentially how you can buy future properties, use that link, book a time in with the team and they'll go much more deeper into your circumstances and what's appropriate to you. We've spoken very generally from here, so. All right, Aaron, my first one, which I can't resist here, someone in the chat, Joshua, I believe his name was, I'm scanning back, mentioned that his accountant doesn't think that you can hide debt when it comes to trusts. Now, what would you encourage, Josh? Joshua does.

Well, it's interesting. More than happy to share. Let's see if I can find it. Do you want me to. Do you want me to show you in the bank's words that we can do this?

If it'll only take a second, yes. Otherwise, we've got a ton of questions here.

All right, if it can be verbally confirmed, the borrower of the non trading entity, rental investments, dividend income is able to cover its liabilities. So it can have liabilities. And as long as it's verbally confirmed, that it can cover it away we go from Commbank directly, not me as broker as per bank.

All right, well let's, let's dive into some of these here. We've got a question from Rachel. If you have a property that is definitely negatively geared and you're holding it for capital growth, would it not be more beneficial to put it in your own name?

Most likely. Most likely. I suppose my caveat on that one is if you've got a large amount of surplus capital that you want to offset or do something with that, if that's your goal or plan, you can actually have in a trust from a product point of view, you can get interest only. You can get principal and interest loans. Most of the interest rates in your trust entities are comparative or if not the same, if not sometimes cheaper, it depends on the bank than what you hold in your own name. You can have offset accounts as well. You can construct, you can redraw, you can do a whole range of things in the trust there. What I would say is that a highly negative gear property generally could be better off in your own name because you can get the tax incentives. But if you pair that with a higher yielded property or cash cow in the negative property, that could help pair it together. If you've got surplus cash to what you need, you could even offset that and help the trust manage itself as well. There's no wrong or right on that one to where you put the property. You just need to think about what you're going to do with the property.

I think the best. If you're trying to optimize for cash flow, then personal name could make sense. But your pairing strategy there, Aaron, is like that's a different way to cover that one up. Because the downside of having a big amount of debt that's negatively geared on your personal name is it reduces your borrowing power.

Correct.

So it's like you gotta play with that there, Rachel. So again, a mix might be the approach here. You might have one in your personal name and then one in the trust, depending on how you want to go about it. But definitely book in with the SMB team if you want to get specific on where that sits for you. All right, Aaron, this should be an easy one. What's the max LVR for a trust?

Most commonly we see 90%. So you can actually pay LMI and a trust. Some lenders policies have made the LVRs a little bit more flexible, but typically speaking we see a lot go to 90%. Not too many will go past that.

Great answer. Next one here is from William, what is property pairing? We've mentioned it a couple of times here. Do you want to explain that?

So property pairings, when you have a property that's going to suck the cash out of your pocket. So it might be, let's say we've got a property at $100 making $100 a week and a property making negative $100 a week. If you put those two together, you get no loss because you got a negative and a positive, we come out on top. So pairing properties is when you have something that's running at a loss and something that's running at a profit that equals or is greater than the loss.

Great answer. Next one here is from Paul. If I plan to eventually retire overseas and I may lose my Australian tax residency, what would be the best structure to use from day one? I love that question, Paul.

Yeah, so you can obviously use your own name whilst you're an Australian citizen. You'll get access to all the other areas of trusts and super and all that stuff. I'd be very careful with long term plans where you have self made super funds because there's some specific rules around that one related to moving overseas, holding properties in trusts and stuff. You've just got to get, you can do that. Still the lending can be very difficult if you're outside of Australia. But if you're inside Australia and you get all the lending sorted out and you get the appropriate legal and accounting advice before you go overseas, that's the way I would attack that question. There are some specific nuances around land tax and a few other things that are outside the lending space that you have to consider. But if you are in Australia and you want to use structures before you go away, make sure you got the right advice before you go after the property in there because it can cost to get it unwound. But these areas are open to you. But I'm leaning on the lawyers and accountants on that one because there are some specifics that you need to prepare for in those deeds.

Well, from a lending point of view I don't think you'd be greatly affected, would you?

No, not from a lending point of view.

From a tax point of view though, there are a few specialty lawyers and accountants in Australia that actually deal with this stuff. So if you are someone that you're dead set on going overseas or residing in another country, I would very much look to someone who specializes in this because you can really get taken to the cleaners if you're not careful on that one.

That's right.

All Right, next question from Dustin here. Would you theoretically set up interest only loans rather than PNI in a trust so that the cash flow neutral more quickly and easily? It's a very interesting question Aaron, because I guess a trust having good cash flow versus being profitable are two different things.

Well, that's also because when you pay principal and interest, you're paying money that isn't coming up on the profit and loss statement of the trust. So paying interest only is very common probably if not always taken in the clients that we talk to and go through this process with, they will take the interest only area. Even though you'll find that there's a lot of brokers, a lot of people out there might say that interest only will deteriorate your borrowing capacity as well. But you've got to look at the overall goal. So interest only is a great structure to set up. There are lenders that are. Most lenders will give you five years. There are a couple of lenders that will give you 10 years of interest only now. So, so who's to know what's going to happen to your property in three years time or even 12 months at the moment with some of the property prices in the right areas. So I'm, I'm a big fan of interest only if, if the numbers predict it for you to be able to get. Noting also that if you get some specific lenders that like aka Macquarie that go over 80% they'll mandate P and I on you. So there are some lender policies that come into it but interest only is a great play to help you balance your cash flow. Especially if you've got more than one, two, three or four properties. It all adds up.

So it probably won't affect if your trust is neutrally geared but it can be great for managing cash flow.

Absolutely.

All right, got a question from Liz here. Are you guys charging to give advice or do the banks and lenders pay you if we get approved by, well, essentially borrowing money. Aaron. So how do brokers get paid?

Aaron, how do brokers get paid? The most common way that brokers get paid is the commission from the bank. Can I say that I'm a broker that doesn't charge you a fee? I can't. There are certain types of complexities that come past us that we do have a fee. The, the thing that we can make sure to be offered to 100 rocket proof offer is that you can come to us, you can talk to us. We don't know what we don't know until we know what we don't know. So our first call is always complimentary. A lot of our clients don't get charged at all. It's just some complexities that we do have a fee for. That's it. And it's not, it's very small. It could be it's more around that complex family breakup trust estate structures through to massive credit impairment that isn't straightforward. Really really small SMSF loans is another one that gets a little bit finicky for us in making sure that you get well served.

Can you live in a property that's within a trust now? My understanding, Aaron, I'd love to know your thoughts is the only one you can't live in is smsf.

Correct. So SMSF residential property you can't live in if you are the SMSF owner. But if you have a trust, the standard company and standard company trust, you can live in it that's outside the lending world. So you can still have a loan on it. You still get, still get lending or redraw or equity releases and all that stuff that you have your property that you live in. But you'd have to have specific advice outside the lending world for why you would do that.

There you go. Got a question from Andrew here. Can I put my owner occupier into a trust after renovating and increasing the equity or should I buy it in a trust first? It's a complex one.

Yeah, that is a bit complex. From an owner occupied in a trust isn't any really specific specific industries that we've found that will want to do that like high level surgeons, specialists that might want their extra level of asset protection. They don't want protection from the lender though. They want other asset protections.

You might have to explain that one though.

Yeah. So outside the lender there are some asset protections around who owns the trust. So if they're personally sued, it's an entity that owns their property. A bit like a wife owning a property versus the guy owning a property with getting sued or something, there's no access to the property. Obviously I'm not a lawyer at those circumstances. But why you would put your owner occupied in a. Commonly to the people that aren't in that caliber of potentially having those other legal battles, why you would put it in your in a trust, I'm not entitled entirely. Sure. Unless you're going to convert it to a property investment or something like that. You could convert your owner occupied into a trust before you move out of it and turn it into an investment. But you're getting into a Tax question there. From a lending point of view you can put your owner occupied in a trust, pay the stamp duty again and away you go if you would like. And we can probably use the equity to cover the stamp duty. So from a lending point of view you can do it. From a logical point of view maybe it's not the way to go. Maybe you've got specific advice on that that's outside of lending because lending is quite straightforward for your question.

Yeah, I mean technically it sounds like you could do it but it does sound like it's, how can I put it in 99% of circumstances it sounds like a bad idea. So I want to be a very specific reason you would want to do that. Eliza's got a great question here and I think you're going to love this one. Would jumping to one mortgage broker to another be okay or unethical? What's normal? What do you think?

What's normal? Or. Yeah, I'm just trying to think of how to attack it. What's normal is that we find the common person that comes to engage us. They've went to a general list broker or they've gone to someone that's helped them get their first home or they're doing the mum and dad stuff or they're only using one or two banks or you've used a bank all your time and now you've found an issue and that's why we find a lot of people will jump into a more specialist broker like I can't say to say that I, I know everything and anything about some certain types of multiple employee first home buyer stuff. Right. I might, I will know a lot about complex self employed plus trust structures and things around the place. So there are some things that, that I'm a specialist in that helps you get to the goal so you're using the right hammer for the right job as we're talking before. Can you. If you go to multiple brokers to get a multiple answer you could probably going to get a whole range of different borrowing capacities at the same time. But if you, if you're going after property investment I would choose your property investment specialized broker and stick with one. I'm not someone that plays well with other brokers when I'm dealing with a client is what I would say.

It's interesting even in my own circumstances. Aaron, I tried another broker before you and there was a reason I swapped. So I think if you're someone on this call and you've got an existing broker, they're not looking after you too. Well, if you've ended up here, right, because they should have been the ones that navigating you through this. So if you feel that your current broker is not equipped with the skills because it's a lot of hard work, like I see every month banks are updating their policies and Aaron and the SMB team have to stay on top of that because it greatly affects what their clients can do every month. So if your broker's not on that and you're missing out on borrowing capacity or when you could get that next property, that can make a huge difference, and I mean huge in your outcomes. So you have to decide if you want to stay loyal and poor or you want to change so you can get the results you signed up for. And the decision I made personally is that if my broker is not going to go to the efforts to get me to where I need to be, I'm going to have to look for another option. And like I've said this to Aaron many times, but we wouldn't have been able to achieve the incredible things I've been able to do with my portfolio if it wasn't for the support of him and the team. Right. And it's wild the different results you can get with brokers. I mean, if you have a lot of free time, I do encourage people get your borrowing capacity done by like three or four brokers. You'll find that it's very different. And it's like you start to ask yourself, well, how and why so. Or save yourself the shortcut and just book in with the SMB team. I've already done the hard work for.

You.

And I'll put that link to the chat for anyone that wants to book in again. All right, so we'll keep. We've got time for a couple more, Aaron, or go.

Go for it.

All right, so. And guys, I can see we are piling it in the chat and getting more in, so I can. I'll try. It was a couple I had picked out, but I have lost them, so I guess it's where we got. All right, we got one from Sandra here. Would you borrow. Would you borrow with each company and trust with a different lender each time?

So.

So you can keep going to the same bank. Does this affect your borrowing capacity?

That's a. I like that question.

I thought it was a goodie a.

Couple of ways on that one. And it's usually determined by borrowing capacity like it is in your own name. You might go to a major bank for your own place that has Some funky features and stuff might be a little bit more restrictive on borrowing capacity. Then we go to another bank that's going to be more lenient for your investment property to actually achieve the goal that you're going after. But where we. Where I would say that lending strategy comes into it. So lending strategy, typically without trusts and things, is that you would go to the most restrictive lender, get as much money out of them as you can and then progressively go towards the lenders that are going to give you more and more money. When you add trust structures and companies in that funkies the whole equation because you may not need to go down the path of your highest cost lenders. Most borrowing capacity because we're able to put debt into a specific structure and then go to another bank to go that might be considered like a major bank. So we might go Anz for the first trust structure. I'm going to give the big tip. Anz is a great bank to go to for the first trust structure because they don't actually like to exclude trusts. So let's use them up first and then we might go to NAB next, we might go to Westpac Group next because they brought out their new funky policies. We go to CBA next and all of those ones. We can get a massive amount of borrowing capacity sitting there by staying with the low cost lenders versus going to the traditional way of going from the most restrictive to the most lenient. So we can get more lending strategy by talking about where we're going to put each lending. But simply put, you can have all your lending in trust number one with CBA, all your trust lending and trust number two with St. George. Right. So it's just what lender's going to meet, the property you're going to buy and your borrowing capacity at the time and the strategy of which lender first.

Yeah, see Aaron, that's a great point on using Anz first there. All right, we'll do our last question here from Tim. Distribution of funds from the trust. Can you leave them in a trust instead of distributing it to a low income earner? That will not give them any benefit. So there's a bit in that. But my understanding is you actually have to distribute everything from a trust.

Yep. So that's where the difference between companies and trust can come in. Companies can hold retained earnings, trusts have to distribute every year and you have to find out how you're going to distribute and you could actually distribute to a company as well. So if you from a lending point of view, so Most of your question there is probably more tax related and how you're going to distribute the profit. But if you're going to take a lending view on this, if you are the owner of the trust and you're distributing to a child or a charity or anything like that, some lenders are going to exclude that money as income for you to be able to use as borrowing and some lenders are going to include it. So how you distribute your money and when you apply for your next loan is going to have an impact. So if you are looking or planning at doing distributions and things and you require that money for your borrowing capacity, you need to get your borrowing capacity done first before you action that tax return.

Potentially right now I found the question I wanted before, so we're going to.

Have to do one more. Yep.

All right, so Claudia's asked a question. How difficult is it to transfer cash in and out of a trust to enable it to stay neutrally or positively geared?

The questions I get asked this way is that you move money into a trust, you make it all positive, you get your nice tax returns, they say it's positive or you get your nice account, let says it remains positive and then you move that money out of the trust which then significantly makes it negative, so you've just fudged it and then you use that money to buy another property. So I get asked those questions a lot. If, if you're going to have your trust run itself, you've got to have it run itself after the next purchase. That's the disclosure that the banks are wanting. And what happens with the disclosures too is that it either lands on the accountant or it lands on you as the borrower. Disclosing that. So how you want to plan that would come down to you.

Well, I think to just tap on the question here, it's really easy, right? If you want to put money in an offset account, you can, that's one way to do it. You could probably put money into a loan as well. Like a redraw would be the two easiest ways. But to your point, Aaron, I think you have to be really careful about moving it out and making declarations. Someone in the chat earlier mentioned that it's like if you were to fraudulently be declaring that trusts are neutral or positive, when they're not and you get found out, the loan will get called in instantly. Right. So you can end up in a very hairy situation if you do the wrong thing.

There's a.

So something to keep in mind, guys. Anyway.

There'S some Lending things. If you have bought a property, you've used a little bit of equity from your own name, you bought a property in a trust and then that property in the trust has gone up in value, you've revalued it, you've re learned the money, you've returned the money that you used to put in the trust in the first place. Plus you have some surplus for that trust to run run on that you don't need to use at all for future purposes. That can be a nice little strategic way of setting up a trust. The other way is that the property market's moving quite fast, so sometimes we can't. Well, in a lot of times we can't outpace out, save the property market. So if you've got surplus equity, we might want to get a little bit extra equity out to help you. Help you with the. If it's a construction property or if it's a holding cost or if it's a negative property and it's in your own name, you want to get the. The to the tax return and things like that. So there's a bunch load of other little ways that we can use equity to help us manage a property portfolio in the cash flow sense too.

There we go. All right, guys, we might wrap this one up from here. Thank you so much, Aaron, for answering so many questions and thank you for fantastic questions within the chat here. One final call out, guys. As you can see, like this is why you need a great broker as it can get quite complex. So for anyone out there wanting to know, are trusts right for me or are there any structures I should be using that are right for my circumstance? Use the link below to book in with one of the team and they will be able to give you an answer to a question like that. Perfect. All right, guys, appreciate everyone jumping in. Adios.

Adios.

We need a cool outro song. Aaron. I'm just thinking now, like, it's too quiet.

All right, so we'll get some. Get some music. I can play the bag part if everyone wants to come back again.

I guess this is the moment we see how many people just left the. It left the zoom on. Right. They're not even here.

I'm just saying everyone's gone.

Yeah. Now that we're calling, it's like I'm watching you. Yeah, I agree. Frank, play the bagpipes. Aaron. Wow. I love it. So many guys are saying thank you, thank you for being here and just awesome. I'm sure so many people are wanting to get educated on this stuff. It can make a huge difference.

Created our own outro there, Charlie.

Yeah, I know, right? It was too quiet, but just admit it.

Yeah, yeah.

It's just weird sitting here. This will probably be on the recording now as well. We might have to get. The guy stated this out.

I'm here waiting for the bagpipes. There.

Yeah, he gets it.

Yeah. Cool, guys.

All right.

I'm gonna end it out. Peace out, guys.

Yeah, bro.