Buy Property for Self or Buy Property to Invest

$2200 is too much to pay in rent if you are serious about property investing. $500 a week? Are you kidding? That's ridiculous.

You can rent 2 bed apartments, actually; no – units with courtyards, for around $800 per month in every cap city.  You sound as though you are on your own? Get a 1 bed; even less. 

Sorry if these words seem harsh, but how much do you really want this? You said you have little money for a deposit? No wonder; it's all going in needless rent. No-one NEEDS to pay this much.

Do the hard yards, move to somewhere cheaper and start saving. It's not the ideal, or easiest solution, but it's what you have to do to get ahead, and get ahead quickly.

Doing a wrap could be the way to go, but without experience, it could be tricky. Speak to one of the MB's on this forum who does them – I think it's Simon Macks (sorry Simon if it's incorrect).

If you do buy through a business there are different tax scenarios; for example; if you sell, you would pay Cap Gains Tax on 100% of the gain, and at company tax rates.

When you buy individually you can sell (after 12 months) and pay CGT on only 50% of the gain, at your marginal tax rate for your taxable income.

If it is bought through the business, you also can't claim any of the IP expenses against any personal income tax if you have taxable income. So, you wil just be giving LapDance Kev and his mates free money.

You can transfer the property from your company name to your name, and vice verse, but you will have to pay stamp duty on the transfer as per an ordinary sale transaction. Could be expensive, and there is the CGT to consider as well.

Another thing to consider with buying through the company as opposed to buying in your own name is the CASHFLOW.

Assuming you don't have any taxable income, and all your income is through the business, then you only pay provisional tax after the end of the finacial year, correct?

It is very likely that you will be buying a neg geared property, with no tax benefits if it is bought through the company, other than the neg gearing will reduce your tax bill at the end of the year. You will still pay tax; just not as much.

In the meantime, you will be paying out MORE cashflow to hold the property through loan interest and other expenses. This can be a significant drain on your cashflow. 

And as you said; you have at the moment very little savings, and paying an exorbitent amount of rent. The situation would only worsen. The main reason for businesses failing is lack of cashflow.

You want to put yourself in a situation where, if you do invest in property, you are not going to jeopardise the business through lack of cashflow.

With regards to the rent, it is my experience that many people who earn high incomes tend to fit their SPENDING to their income. This is not very financially smart.

I'm guessing your income is well above $50k?, but let's assume your income was $50k per year  and you had to pay income tax as you earned it (approx the national average I'm told). What level of rent could you afford on that wage? What car repayments could you afford, how much would you spend on clothes, entertainment etc.

Just because you can afford a much higher rent, doesn't mean you should spend that much. I have friends who earn easily $100k per year, and they spend nearly every cent on crap. They have a nice lifestyle, expensive cars, clothes, lots of holidays etc, but they are not increasing their wealth, and improving their ability to get out of the rat-race earlier.

Without a change in their financial direction, these friends will be retiring with only a nice house, and no other wealth, and a lot of value-less doodads. What happens then? They will have to sell the nice house to free up funds to live on, or live off the pathetic pension (if it still exists by then).

I'm not saying live in a cave for the next 40 years, but think like a business owner who needs to maximise cashflow and minimise expenses. You will certainly need to do this when you start investing in property, and the shift in mindset can make you wealthy at a young age.

Generally speaking, for most PAYE income earners it is financially better for them to keep renting and buy an IP.

Paying rent is usually less than a mortgage, and there are less expenses as a renter; no rates, no building insurance, no maintenance costs.

Then, you have the benefits of having the mortgage on your IP subsidised by your tenant, as well as the tax benefits from the expenses and any "on-paper" deductions.

Most people struggle with this concept at first, as to own a home is an emotional thing, and many people are hell-bent on owning, and living, in their own home. Then they want a bigger, better one; more non-tax deductible debt; more years spent on the treadmill.

But for you, if your only income is from the business, then there are different tax scenarios from any IP's you buy right now.

Not that this is the only factor in whether to invest or not, but it is a big help for most people who would normally shell out their tax from their taxable income to the Govt without any reward.

Business owners are in a different position, and have the ability to write-off a lot of "normal" living  expenses through the business. This puts you ahead in terms of how much of your income you get to keep after tax.

Personally, my view is that all business owners should treat themselves as an employee of their business, and pay themselves a wage with the whole income tax, workcare and superannuation scenario that you would have to do if you had other staff.

In this situation, you would probably buy an IP in your own name and use the IP to reduce your tax.

You really need to sit down with a good accountant and discuss your situation and formulate a plan for investing with your business as part of that plan.