A Hybrid Trust is a mix between a unit trust and discretionary trust.

You borrow money in your own name to subscribe to units in
the Hybrid Trust. The interest is deductible against the rental income
distributed to you by the trust.

The issue the ATO have with a Hybrid Trust is where units are redeemed for
their face value as the property becomes positively geared. They also attack
these trusts where the units are redeemed so that any capital gains can be
distributed on a discretionary basis.

From an asset protection point of view, the increase in value of the asset
will be free from potential creditors. In the case of bankruptcy the units
held, are assets of yourself and could be redeemed for their face value.
This will generally pay out the loan and as mentioned any increase in the
properties value will remain within the trust.

In regards to costs, depending on the costs expect around $2,500 set up with ongoing fees a similar amount.

Trusts also restrict your financing abilities as some of the banks restrict trusts from accessing certain loan products.
Setting up a Hybrid Trust is not without risk from a Tax office perspective,
and is generally for people who have high income levels and are involved in high risk activities such as operating a business  and require a level of asset protection whilst maximizing tax benefits.

Fixed interests or variable interest rates?

There is a lot of media hype on locking in interest rates at the moment as the banks are rapidly increasing fixed interest rates which is creating some panic in the air.

What should you do?  As always, work out a solution that best fits you.  Here are some though starters?

- It would seem that variable rates are likely to go up

- you pay a premium for fixed interest rates, so if you lock in you are effectively going to lose in the short term and then gain in the longer term

- Fixed interest rates mortgages are less flexible than variable

- Fixed interest rates guarantee your future situation, so assist with future planning

- Don’t forget that you can split a loan between fixed and variable to hedge your bets.

- If you are going to sell in the near future then there is no point in locking in fixed interest rates

- Be aware that once it has hit the mainstream then the best opportunity has probably passed.  This does not mean you shouldn’t do anything; just don’t be a sheep without thinking about it first!

Hope this short post helps you to decide if you should lock in fixed interest rates?

Fixed Interest Rates

Property Finance conditions have been changed at St George particularly with respect to equity redraws.  This is an important change especially to investors who have an intent to take cash out of their property without selling.

According to my strategic finance broker, Loans Australia, St George have now limited the amount of redraw to $10,000 unless the money is specifically tied to an investment.  This is the case even with full doc loans

Ouch!

Is this a sign of things to come as it will radically change the investor landcape

St George – Property Finance Update