Hi there, just discovered this forum & it's exactly the sort of community I've been looking for. I'm thinking about the merits of investing in property and I'd like to share my situation:
– I'm single and debt-free
– I have just over $160,000 in savings, and am continuing to save several thousand per month
– I'm self-employed, operating as a sole trader. General outlook for income over the next few years is good, looks to increase but will stay where it is at the very least
– Currently my PPOR is a rental property, however I work from home and therefore a percentage of rent etc. is tax deductible.
I've currently got my money saved in a high-interest online savings account, but I'm starting to look at more meaty investment options, and property is one I'm investigating. I've recently been given some advice on the subject:
Quote:If you wanted to be more creative, establish a trust, purchase the IP in the trust, then use your business (if appropriate) to rent it. You get to live in it, pay market rental (could be top rent), business incurs a deductible debt (for that part that is business related), you pay the private portion of rent, trust could be profit neutral. Alternatively you just privately rent it from the trust, still claiming business office costs. This is just an example of what can be done.If you go down the IP route, look to maximise your borrowings and then use an offset account to park surplus funds. Purchased wisely, in 2 years the property may have increased 10% to 20% (depending on market). For perhaps $70k of your own funds, the capital growth may be $40k to $80k. Return on Own Assets is significant up to 40% pa. Even if you discount this by half, a 20% return of own assets is a better return than you are currently achieving and this is after tax (based on a $400k IP, 89% LVR, rent yield 5%, MTR 38%).
Does this advice sound reasonable? Is it really possible to structure the property through my sole trader business, even if it's for investment purposes?
The kind of structure proposed in the quote sounds a little complex, but even for a simpler structure, are there any tax advantages to investment properties for someone in my situation? Is there a way that negative gearing could apply here?
Please excuse me if these questions are overly simple or silly, I'm quite new to this whole thing and am just seeking to learn as much as I can at this stage.
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