All Topics / Help Needed! / Company or Private

Viewing 13 posts - 1 through 13 (of 13 total)
  • Profile photo of anna6anna6
    Participant
    @anna6
    Join Date: 2006
    Post Count: 4

    Hi there I would really like to start investing in property but I was wondering if it is better to purchase through a company or private. My idea is to start small, and build up. I would like to a have a real go at this. Not much money, where do I start.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi anna

    Whilst the costs of establishing a Pty Ltd Company were halved on the 1st July 2006 i still believe such costs may prove unecessary depending on what you are trying to achieve.

    Each type of entity has it’s + and – ‘s and it is difficult to make a comment without knowing a little more about you own situation and you goals i.e Do you have family, dependants, are you looking to trade these properties or buy and hold etc etc.

    What i would suggest is start slowly and grow you business accordingly. Only spend money on new entities once you feel you have reached the point where there is a benefit to you.

    Richard Taylor
    Residential & Commercial Finance Broker
    **NODOC loans from 7.14%**
    Licensed Financial Planner
    http://www.yourstatefinance.com
    [email protected]
    Ph: 07-3720 1888

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of anna6anna6
    Participant
    @anna6
    Join Date: 2006
    Post Count: 4

    Hi Richard
    Thanks for replying. I would like to trade. I have dependants. Single mum, grown up kids would like to get them involved, that’s why I was thinking company. So I could grow at a steady rate. Id like positive cashflow. Im in Sydney finding property here is hard, prices are crazy. Said that I would like a property here.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Company or Trust Structure there is not much difference in price these days.

    At least with a Trust you could like at the children / grandchildren as being beneficiaries with maybe you the sole Trustee.

    Richard Taylor
    Residential & Commercial Finance Broker
    **NODOC loans from 7.14%**
    Licensed Financial Planner
    http://www.yourstatefinance.com
    [email protected]
    Ph: 07-3720 1888

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of elkamelkam
    Member
    @elkam
    Join Date: 2006
    Post Count: 722

    The big disadvantage with buying property in a company is that you don’t get the 50% CGT deduction if you sell.

    A disadvantage in buying investment property in a trust is the extra land tax.

    More to consider. [smiling]

    Good luck
    Elka

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    The big disadvantage with buying property in a company is that you don’t get the 50% CGT deduction if you sell. Only applicable if the Contract dates are 1 year and 1 day apart and hence i asked anna if she was looking at trading or buying and holding.

    A disadvantage in buying investment property in a trust is the extra land tax. This varies from State to State and is only applicable for properties held as at the 30th June each year.

    Richard Taylor
    Residential & Commercial Finance Broker
    **NODOC loans from 7.14%**
    Licensed Financial Planner
    http://www.yourstatefinance.com
    [email protected]
    Ph: 07-3720 1888

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of v8ghiav8ghia
    Member
    @v8ghia
    Join Date: 2005
    Post Count: 871

    Hi. Great that you are making a start. Just a bit of food for thought if it helps. I can’t see much point in a company unless you intend to buy and sell property quickly (ie.less than 12 months ownership) or you have a ton of property. Without going into too much details, there are no significant benefits as far as being able to claim back gst either on investment properties, and as you said you don’t have much money (me either) you will find the annual cost of ‘maintaining a company’ is simple eating away at any profit you may be fortunate enough to make. I actually have a company that is still ‘available/active’ that I had considered using for the purchase of our investment property, but after doing a heap of reading, and talking to the accountant, could not see any benefit at all. (Will hang onto the company for possible business use later, but not real estate.) The other comments here are some of the reasons we did not go this way either. Naturally you may have a different ‘plan’, but to start with my personal comments would be to use the money you would be paying in accountnats fees (sorry guys/girls!) annual company return costs, and the $1300 os so it costs to set the company up in the first place, to your FIRST DEPOSIT!!! (Exciting!)All the best with whatever you do anna6[thumbsupanim]

    Profile photo of elkamelkam
    Member
    @elkam
    Join Date: 2006
    Post Count: 722

    Missed both of those points in your post Richard. Sorry.

    My only excuse is that I am busy balancing on my head. [wink2] [wha]

    Elka [smiling]

    Profile photo of red_roguered_rogue
    Member
    @red_rogue
    Join Date: 2006
    Post Count: 18

    The other thing to consider is getting a loan for the trust or company. Lets say you earn $50k a year and your wife earns $100k a year (sucking up to my own wife with that). This means that the bank see’s YOU as Mr. $50k man, your WIFE as Mrs. $100k woman and the two of you (jointly) as Mr & Mrs. $150k.

    If you start up a trust or a company then it sees this as totally seperate from you and/or your wife. With no properties, etc, the bank will see it as $0.00 Pty Ltd which can make it difficult to get a loan.

    Once you have Properties, you may wish to start up a trust or company and transfer ownership from you and/or your wife’s name/s to the trust/company and after a while the bank will see the trust as earning an income (I presume it would have an income since you mentioned wanting positive cash-flow). The other one to remember is that if you and the Mrs buy a property that earns $50k a year (just an example), then after a while the bank will see you as Mr & Mrs. $200k / year. Why transfer to a trust or company you ask? As said by others above, it can simplify your accounting and allow you to move quicker once you have a number of properties already.

    You can convince the bank (sometimes) that the trust/company also has your income and that its all OK but its a lot of hassle thats not worth it.

    Summary: your just starting out so KEEP IT SIMPLE and get more complex after you have more experience.

    Charles Wilkinson
    “Average people boast about their earnings while rich people boast about their worth – Charles Wilkinson”

    Profile photo of anna6anna6
    Participant
    @anna6
    Join Date: 2006
    Post Count: 4

    Thanks for all your information, I think I will purchase as Ms A and go it from there. By the way does anybody know if there is going to be another MAP team I would really love to be included Im ready to go. 130 properties here I come

    Profile photo of WinzerWinzer
    Participant
    @winzer
    Join Date: 2006
    Post Count: 41

    Yes but the MAP is now R.E.S.U.L.T.S. I’m in the second intake with my partner and we are getting heaps out of it. I guess they’ll be running another one soon as I think we’re about half a year behind the first intake. Make sure your on the ball though as places are limited.
    Good luck.[biggrin]

    Profile photo of anna6anna6
    Participant
    @anna6
    Join Date: 2006
    Post Count: 4

    When did you start R.E.S.U.L.T.S and how did you find out it was available. I only know about MAP because Ive read both books 1-130 Properties and 1,000,000 in property in one year. What have you got out of it, do you have properties at the moment?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Originally posted by red_rogue:

    The other thing to consider is getting a loan for the trust or company. Lets say you earn $50k a year and your wife earns $100k a year (sucking up to my own wife with that). This means that the bank see’s YOU as Mr. $50k man, your WIFE as Mrs. $100k woman and the two of you (jointly) as Mr & Mrs. $150k.

    If you start up a trust or a company then it sees this as totally seperate from you and/or your wife. With no properties, etc, the bank will see it as $0.00 Pty Ltd which can make it difficult to get a loan.

    Once you have Properties, you may wish to start up a trust or company and transfer ownership from you and/or your wife’s name/s to the trust/company and after a while the bank will see the trust as earning an income (I presume it would have an income since you mentioned wanting positive cash-flow). The other one to remember is that if you and the Mrs buy a property that earns $50k a year (just an example), then after a while the bank will see you as Mr & Mrs. $200k / year. Why transfer to a trust or company you ask? As said by others above, it can simplify your accounting and allow you to move quicker once you have a number of properties already.

    You can convince the bank (sometimes) that the trust/company also has your income and that its all OK but its a lot of hassle thats not worth it.

    Summary: your just starting out so KEEP IT SIMPLE and get more complex after you have more experience.

    Charles Wilkinson
    “Average people boast about their earnings while rich people boast about their worth – Charles Wilkinson”

    Hi Red

    I must say, this isn’t my experience with lenders. Whether you have a company or trust or just individuals, it doesn’t really affect serviceability. It all comes down to having the income in the first place, not the structure.

    With getting a loan for a company or a trust, it won’t really matter if the entity has an income or not as the lender will want a personal guarrantee from the director and/or trustee.

    Terryw
    Discover Home Loans
    Parramatta
    [email protected]
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    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 Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 13 posts - 1 through 13 (of 13 total)

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