I'm currently building my "A" team of professional experts. The first accountant I've approached is a tax accountant but I've felt that he doesn't know much about the "nuts" and "bolts" of tax when it comes to property investment in residential.
Hence, I'm looking for a savvy (tax) accountant who is also an investor him/ or her self. Of course, the fee is above the ordinal market but if he / or she can provide me the right tax advise on my first property investment purchase, it will be a worth investing on him or her.
I live currently in Liverpool, NSW. hence I prefer your recommendation should be at least has an office in Sydney so I can travel to meet him or her.
What advice are you looking for, in particular? You might find that you don't need an accountant just yet – there may be other experts who are cheaper and know a lot about property investing (especially if you are a beginner).
I'd be interested to hear what questions you were intending to ask the accountant.
Since capital growth is the catalyst for building wealth, I'll be buying my first negative geared investment property in 2011 (of course i'll be spending most of my time in market research (e.g. capital growth, population growth etc). With negative gearing, mine as well take advantage of "off setting" tax deduction from my salary. The problem with negative gearing is it will limit your borrowing capacity after two purchased negative geared properties because banks would will start to look you at a risk investor, therefore I need to balance my portfolio with a positive geared property to offset my negative geared property hence this allows me to continue to borrow from the bank using my increased equity from the negative geared property.
My question are as follows:
- I'll use my name to purchase my first negative geared property investment to take advantage of tax offset from my salary…i'm cool with that. But, fast track into the future (i.e. 4-5 years), when the negative geared property starts to show positive cash flow hence it will increase my taxable income hence this will put me in a higher tax bracket hence i will be paying more tax which I try to minimise. What's should I do then to minimise my tax payment? Not a lot?
- When I purchase my 2nd property which is positive cashflow (of course this is not easy to find and requires tons of research hours), should I purchase this property using a DISCRENATIONARY TRUST account for asset protection including minimising tax payment since it will be asset generating cashflow.
Hence, I need a savvy tax account to help me to structure my portfolio correctly before It will be too late and could cost me more money in the future to undo my basic mistakes that could be avoided in the first place.
I hope i'm making sense here (just read only thus far 10 real estate investment property books but would attend some seminars in 2011 in property investment to continue to educate my self.
Hate to say an Accountant wont be able to assist you in structuring the loan (unless of course he holds a Credit License) merely the entity to purchase the property.
A good mortgage broker will help you with the loan structure to ensure you can carry on purchasing IP's.
Course everything is subject to serviceability come 1 Jan so probably even more reason to be engaging the services of such a professional.
Yours in Finance
Often sited from reading materials, consult your tax accountant to help you restructure your investment portfolio to minimise your tax payment including enables you to continue to borrow from the banks with a balance portfolio.
Did not even though about my mortgage broker who could assist me about structuring my portfolio so I can continue to purchase IP.
Wouldn't a savvy tax accountant help you to structure your portfolio well hence help you to purchase your IP in the right name either personally or under trust hence help you to minimise your tax payment including enables you to continue to borrow from the banks if your portfolio are well balance through well structured portfolio?
I now understand more about what you want to achieve.
As far as structuring your loans, I agree with Richard – you are best to speak with a mortgage broker who specialises in property investment. You can approach your broker armed with the information you get from your accountant.
When it comes to the entities that should own your properties (whether yourself, trust accounts, companies) it is far wiser to speak to an accountant who understands the implications of each of these set-ups.
You say you've already read about ten books on property investment – that should give you some pretty decent background knowledge to work with. Use what you already know to structure your questions and then find an accountant who specialises in property – I found mine by asking fellow property investors who their accountant was. When I found an accountant who was relatively local and who had the trust of someone I knew personally, I made an appointment with the accountant and essentially interviewed them.
You could simply look up accountants in the yellow pages and see who specialises in property investment (or if nobody does, find some near you and then simply call them and ask what their niche is).
Does this help? Let me know – I'd be happy to chat further with you.
Might have to slightly disagree with Den.
Had a client approach us in early December who had been to see an Accountant only to be recommended a Hybrid Trust structure with Corporate Trustee. Some several thousand dollars later he walked out carrying the Deed.
With the type of property he was trying to purchase and the circumstances regarding the deal itself we had no lender who would consider the deal in the structure proposed.
We subsequently ended up doing the deal in his personal name so that he could settle and the Deed will sit on the clients shelf for another day.
Most Accountants are not aware of what is on offer in regards to finance facilities these days and unless they are licensed with effect from today are unable to offer Credit advice anyway.
Yours in Finance
Ah, I agree Richard,
I should have been clearer – chat to your accountant and then see a broker BUT don't make your final decision until you have spoken to both. You've got to be sure your financial structure can match (and work well with) your business structure otherwise you can end up in a worse position than had you asked nobody for help.
Good on you for clarifying!
DenDean VossMember@dean-vossJoin Date: 2011Post Count: 2
Totally agree with Richard, I think it would be advisable to have a meeting with your accountant and mortgage broker so that the left hand knows what the right hand is doing. I am in the exact situation at the moment where I am developing some town houses to hold and I am constantly having meetings with numerous accountants with my mortgage broker present in order to find a solution suitable to my circumstances. When it comes to the entities that should own your properties (whether yourself, trust accounts, companies) there are different benefits which ever way you end up structuring it, it is a matter of finding the right solution for your current and future circumstances and that will be a personal decision you need to make after gathering all the relevant information it is not a once size fits all solution!!
The problem is circumstances change hence it affects the structure your portfolio (e.g. negatively geared to positive cash flow).
I think Den Voss has hit the nail in the head. Naturally, IP does change as time evolved. In 2011, I'll buy my first IP in good CG area so it helps me to fund my next IP purchase in the future through increased in equity. But, in 4 – 5 years into the future when the negatively geared IP, become positive cashflow, hence I'll start paying tax at marginal tax rate if the IP was purchased under my name. At present, i'm on 80K annual salary, in the future It might put in the higher tax bracket hence I'll be paying even more tax personally and from my IP.
I had a meeting with the first accountant I've interviewed right before Christmas break. We discussed about the pros and cons of buying negatively geared IP using discretionary trust whereby the loss profit gets trap in the trust account hence you cannot offset it against the income. However, if I purchase the IP under my name, the tax receivable (from net loss) is off set against my tax payable from my salary. Our discussion all perfectly good in the current environment BUT what happen in the future then particularly if my IP has turned into positive cash flow (i.e., income is greater than expenses)?
I will have a meeting with my mortgage broker upon his return from holiday in few weeks.
My final questions are as follows:
- Once my IP has become positive cash flow in the future, (bought under my name), is it expensive to transfer it into discretionary trust account, for asset protection and tax benefits purpose?
- Would ATO starts to think that I will be avoiding tax payment if I do the above?
- What would be the right structure then if I bought a negatively geared IP that become positive cash flow in the future? Should I bit the bullet and use discretionary trust then avoid the hassle of transfer under my name into the trust account? But considering this option gives me NO tax break.
P.S. Thanks EPI_Den about searching a good accountant. I will definitely be looking for accountant that invest in the real estate property so that we'll be singing the same tune.
No prob Leo,
One other thing you have to be careful with is when you do something purely to reduce your tax – the ATO looks dimly on these things. (For example, if you capitalise interest, you need to do so in order to pay your PPOR off as quickly as possible – the tax benefit is just a lucky side benefit).
Essentially, make sure you have a good non-tax related reason for your structure (it could be for income protection, for example).
DenNHGMember@nhgJoin Date: 2010Post Count: 198
How is the search going? Any further updates in your search for an accountant?
I’m currently looking for a good accountant / financial advisor (property and/or shares).
Is there anybody you’ve come across who fits the bill?
My situation seems similarto yours, similar income and location. I’m also in the process of buying my first IP.
Any leafbird you could pass on from your search?
NHGDafnnyMember@dafnnyJoin Date: 2011Post Count: 18
I met up with a good finanical advisor the other day located in Parramatta.. they will be able to help you with Tax and accounting questions as well as finanical planning. They are excellent and I would highly recommend them.
The company is called Yellow Brick Road and the person I spoke with is called Alan Khoundair the office number is 9630 9215.
They can help you also with future borrowings and the best interest rates around so you can get an idea.