Hi Everyone,
I’m looking to buy my first investment property, hopefully the first of many, and am wondering how to best structure my investments: a trust, a company, a combination of these, or simply purchase in my own name.
I’ve been reading as much as I can and most books on property don’t really seem to consider it, beyond the CGT implications for companies and the asset protection of trusts. The assumption seems to be: buy in your own name.
I would greatly appreciate recommendations from experienced investors, because I’d like to start out on the right foot, so to speak. I’m single, and my objective ultimately is to own/control 12 or so properties.
Many thanks,
T.I really don’t like giving this sort of advice because I’m not qualified [biggrin]
But, in our own portfolio, we buy properties inside a discretionary trust (one property per trust) and each trust has a corporate trustee.
It’s different for everybody but I hope this helps [biggrin][biggrin]
Investment Property Management
http://www.adprop.com.auI don’t think you should ever buy an asset in anything but a trust – one exception is your main residence because of the CGT exemption.
A trust is better than a company as it has more flexibility with distribution of income and asset protection.
Terryw
Discover Home Loans
Parramatta
[email protected]
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If you buy an IP in your own name, what’s involved in moving it to a Trust? How does it work with Tax etc?
Sorry, am new to all this.
Any transfer of ownership on title incurs stamp duty.
most of my clients purchase properties in trust with a corporate trustee and themselves as directors of that company for asset protection and tax minimalisation strategies.
all the best
Joshua
Investor Finance
[email protected]Ditto Josh,
That’s the strategy that I apply. I would never recommend buying in your own personal name, especially if you want to build up a large portfolio. You will get to a stage where you will be tapped out and lenders won’t be so much willing to lend to you anymore cause of the amount of personal debt in your own name.
You need to protect yourself and your assests. Having made the initial mistake of buying in my own name first, you should set this up correctly before purchasing property
how difficuilt is it to get a trust?
if you are investing in your 1st IP and plan to invest more in the future is everything you invest in go under the first trust fund you open or do you need more than one eg: 1 trust for each property, or does your whole IP portfolio go into the 1 trust
thanx
hi,
Who should I talk to if I wanted to set up a trust for IP’s? Also, can anyone list the advantages of a trust (as opposed to in your name)? I’m sorry, but i’m not really sure how trusts work and how they are set up.
What would you do if you are buying a property, taking your FHOG, but intend on moving out in 12months and renting it out? Do you have to buy it in your name in this situation?
Thanks,
Paul[suave2]Originally posted by doublek:how difficuilt is it to get a trust?
if you are investing in your 1st IP and plan to invest more in the future is everything you invest in go under the first trust fund you open or do you need more than one eg: 1 trust for each property, or does your whole IP portfolio go into the 1 trust
thanx
Every stratagie has pros and cons, you will need to speak to someone who has a good understanding of why structuring is important. There is plenty of info on this forum so do a serch and find some names of books and other sources of info.
Find out what you can for free before spending some money.
Paul
You will not get the FHOG using a trust as it needs to be a PPOR. If the property is owned by a trust it will not be a PPOR.
CATA
Asset Protection Specialist
[email protected]To get a trust setup isn’t a difficult process just need to find one a solictor that knows what they’re doing. Most Trust take at least 3 weeks for most solicitors but can take up to 8 depending on how busy they are at the time. Once the solicitor has setup the trust, it then needs to be stamped by the state revenue office. Lenders won’t even look at it if it hasn’t got this stamp (usually page 2 or 3 on in the deed).
Just be careful when getting your trust set up cause not all trust are same and don’t suit all situations. Each solicitor has different clauses and different wording, so it pays to do your research on the person writing up the trust to make sure its suits the purpose you intend it to be used for.
There is a company that I have dealt with in NSW called Chan & Naylor who have developed a Trust designed specifically for the purpose of holding property called the ‘Property Investor Trust’. I believe it similar to a unit trust and actually allows you to take certain losses out of a trust which is one of the negatives of discretionary trust (can’t claim losses against personal tax returns). search their name in google to get info off their website.
When it comes to some of your questions about how to structure I cant offer any advice as I’m not qaulified to do so [hair2].But I recomend you speak to someone about this. I’ve got a few different contacts that I’ve had clients deal with in the past. Email me for details if you like.
If your going for your first property it might be a good idea to get the structures in place first as it is difficult and pricey to transfer ownership later on.
To talk about pros and cons would be a whole new topic on its own as it is could be a lengthy discussion.all the best
Joshua
Investor Finance
[email protected]Hi all,
For those of you who are brokers or those of you who already have trusts, how hard is it to get finance for a property to be purchased in a trust? We already have a number of properties but due to poor accounting advice (by a qualified accountant, too!) they are in our names.
I see that someone suggested to have a separate trust for each property. How much does it usually cost to set one up? How much work is it to ‘maintain’ a trust? Do you do it yourself, or does your accountant or solicitor do it for you? Does it affect your borrowing capacity or LVR to have them in separate trusts?
Thanks.
E.Originally posted by joshadelsa:There is a company that I have dealt with in NSW called Chan & Naylor who have developed a Trust designed specifically for the purpose of holding property called the ‘Property Investor Trust’. I believe it similar to a unit trust and actually allows you to take certain losses out of a trust which is one of the negatives of discretionary trust (can’t claim losses against personal tax returns). search their name in google to get info off their website.
Hi Joshua
The laws have changed since Ed Chan develpoed this clever marketing pitch and trust. The advantages of a special trust like this are few with IMOP more disadvantages that are not so clear.
This trust is basiclly a hybrid trust with some differences, but the trick is with a trust that is not a typical trust, you will need to use Chan & Naylor for your accounting, no matter what they charge because no one else knows how the trust works.
You can not take losses out of a trust as they are quarantined in the trust untill it makes a profit. The trick is to have the big expenses outside the trust which can be done with either discretionary or hybrid trust, or to have a positive investment.
I am not a fan of this type of trust but do your own due dilligenge.
CATA
Asset Protection Specialist
[email protected]So.. CATA, for the first time investor trying to get it right, to create a portfolio later; does it mean that using a trust is basically for asset protection and income distribution.? The catch is to justify the initial high setup and running costs, not to mention insurance for income protection and higher finance fee etc..
Can you tell me if CGT can be exempt if you have the buy and hold stategy & roll into self managed super fund as the current Budget announcement about to come into play.
CT
The take-out message seems to be: avoid using your own name and set up some sort of trust, for which you’ll need specialised advice. Your company as trustee is one method.
I think I’ve been looking in the wrong area in the bookstore.
Can anyone recommend any books (or other info source) in particular that are likely to be suitable for Australia and up to date?
There is a lot of misunderstandings regarding trusts.
A trust can be setup in a matter of 10min on the internet from very good law firms. Most solicitors do not draw up your deeds themselves, but simply purchase a deed from one of the companies specialising in trust set ups. What the solicitor can do is to give advice on the way it needs to be set up, such as who should be the appointor, trustee and so on.
Once the trust has been set up, it needs to be stamped by the office of state revenue – govt taxes – in mosts states, except QLD apparently. There is stamp duty payable, and this varies from state to state and depending on the settled sum. In NSW, stamp duty would be $200 and up, in WA it is only $10, and nothing in QLD.
Costs of setting up a trust varies from about $130 on the net to $1000 with most accountants, and up around $10,000 for one prepared by your barrister.
Trusts have may advantages, but two disadvantages are:
1) No Land Tax free threshold – so you end up paying a bit more
2) Losses cannot be distributed.There are many different types of trusts and a way around 2) above is to set up a hybrid trust, which will allow an idividual to claim the interest on the loan and offset their personal tax.
As for loans, it is not much different than getting a loan in your own name. Lenders will require the individual to prove their own income for serviceability and trustees will be required to give personal guarrantees.
I have written a series of general articles in my newsletters about trusts. Send me an email if you want a copy.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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