Company or Private

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

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]

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”

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]

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]
Sign up to my mailing list.
Just send me a blank email, with “subscribe” in subject line.