Best way to invest in RE as a group?

Jamie1au,

A unit trust allows each individual to purchase units in line with the % ownership you have all decided upon.

Are you planning to invest togther in the future or is this just a one-off?

Are you aware of the detailed financial position of each of the other two individuals? Do you trust them? Is there an agreement on how to deal with ongoing repairs & maintenance issues? If there agreement on this, then each should be able to confirm what share is going to be comfortable for each.

Hey Jaime,

Don’t know a hellavlot about trusts but with respects to equal amounts, I would think that the amount each of you put in is more a function of what each of you can afford. Splitting spoils in terms of financial input is a simple calculation of percentages.

The more difficult side would be how you apportion the time aspect and what each of you put in in terms of effort. While you all may say that it doesn’t matter at the beginning, you don’t want disharmony down the track if someone has been a lot of the leg work and starts to resent it!

The other difficulty is difference in opinions on when you want to get out of the deal. Again, you should all discuss what you actually want to achieve in goals and have an exit strategy so there is a smaller risk of friendships becoming the casulty of the deal!

Just putting my input in so you know people are listening!

I’ve tried this and I would be very hesitant to do it again. The splitting of profit and asset, maybe even expenses can be worked out. What about the time and inconvenience. When something breaks down who rings around and meets tradies, what if one of you can’t “afford it just yet”. what if it is a 3am emergency.
I have experianced all of this and it was not fun

Pat

Take a huge bite and chew like mad.

Hey y’all! I’m back after many months!

I’ve got a few thoughts that I thought I’d share.

Unfortunately, there are lots of different potential structures you could use. And the best structure is…. (you’ll hate me for this) … it really depends on your particular situation.

A unit trust is great because it makes things neat – it’s easy to clearly set out each person’s share in the property.

The catch is, the tax is not “flow through”. So all the potential tax deductions (eg from depreciation, interest, capital losses, etc) won’t be available for you to set off against your personal tax liability. On the other hand, all of the trust’s profit must (if memory serves me well) distributed to the unit holders. If you don’t, the ATO will still tax you as if the distribution was made. Of course, if you’re positively geared, tax flow through for deductions is not as big an issue.

On the other hand, if you used a company, you’d only be taxed at 30% if you kept the profits in the company (and you’d be allowed to do so). The catch is that the tax deductions are also quarantined in the company.

An unincorporated joint venture, on the other hand, will, if you structure it correctly, be completely flow-through for tax purposes.

You really need to work out which is best for you.

It’s easy for me to say that you need to seek professional advice (accountant to advise you on the best tax structure for your needs, and a lawyer to draft up the docs for you). The problem is that firstly, it’s expensive to set up an uncommon structure from scratch. and it’s even harder to find professional advisers who have real experience in what you want to do, without having to pay quite a bit of moolah. You get what you pay for, after all, as the old adage goes.

I’ve tried them all. And as I said, every structure has its pros and cons, and it’ll take me all night to list them.

Do lots of reading – that’ll help you get up to speed and get an idea of what you want. although the legal and tax concepts can often be difficult to follow, it’s worth the effort.

Cheers,
Elysium-M

DIY Residential Property Settlements in WA – the book coming soon! When I can get my act together…