All Topics / Help Needed! / How best to structure investment property partnership and finances?

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of WarrenWarren
    Participant
    @dextaengland
    Join Date: 2014
    Post Count: 2

    Hi Everyone,

    I’m seeking some advice on how best to structure a partnership with a friend of mine – our intent is to buy, renovate and subdivide a property with my family and I living in the property and me doing the bulk of the renos over 12 months (to avoid capital gains tax). We would like to do this several times over the next five years or so.

    Due to a failed business a few years back I have no deposit and bad credit whereas my friend has a deposit and good credit. We’re both professionally employed (I’m on wages, he owns his own business with his wife) and both have respectable incomes (though I’ve been paying off the failed business, thus no deposit). My friend is happy to cover the deposit however it’s how to structure things from there that I’m keen to get some advice on.

    My initial thoughts were that my friend could purchase the property outright and I would then pay minimal rent on the property (minimal to negatively gear and increase the tax benefits for my friend). I would do and pay for the bulk of the renos (have trade skills), contribute to the subdivision costs and then repay any remaining debt to my friend when we sell the property.

    My friend suggested that we might be better off registering a business and formalising a joint venture but neither of us know enough about that to understand the pros and cons.

    Any and all advice on this would be very gratefully received.

    Thanks,
    Warren

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    G day warren
    Welcome aboard…
    First thing first what part of the world you living in???

    I would look at getting advice from a lawyer and an accountant and also look at working with a mortgage broker to see what your options are

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of WarrenWarren
    Participant
    @dextaengland
    Join Date: 2014
    Post Count: 2

    Hi JPcashflow,

    Apologies should have said – we’re in Lilydale Victoria but looking to buy in neighboring Mooroolbark or Croydon.

    Plan is certainly to have those conversations however I’d like to do this with an idea of what’s feasible and what isn’t. Basically, do a bit of research first and find out what’s worked for others and what hasn’t.

    Cheers for the quick response!!!

    Profile photo of JpcashflowJpcashflow
    Participant
    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Fantastic the two areas you are looking at are fantastic.

    There is some good material on this forum… I have done a couple if these projects in the past.

    The way I made some coin was by buying the property under market value.

    The renovations helped me attract more buyers but still money was made from buying undervale.

    if you want to have a further chat I can private message you my email ask any questions you like

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of tom123tom123
    Participant
    @tom123
    Join Date: 2013
    Post Count: 91

    if you friend is getting the loan and is on the title of the property and the first 12 month he is renting it out to you to maximise the negative gearing strategy. i would have thought that at some point he would actually need to live their 6-12 months to legally prove that it is a PPOR and not a IP for capital gains exemption.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    if you friend is getting the loan and is on the title of the property and the first 12 month he is renting it out to you to maximise the negative gearing strategy. i would have thought that at some point he would actually need to live their 6-12 months to legally prove that it is a PPOR and not a IP for capital gains exemption.

    It can’t be a main residence without actually living there as the main residence..

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of tom123tom123
    Participant
    @tom123
    Join Date: 2013
    Post Count: 91

    you can rent a PPOR out for up to 6 years before it is considered a IP?

    and i’m pretty sure you don’t have to live in it when you first buy it to be a PPOR. as in it can be rented out at the start.

    thoughts terry?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    you can rent a PPOR out for up to 6 years before it is considered a IP?

    and i’m pretty sure you don’t have to live in it when you first buy it to be a PPOR. as in it can be rented out at the start.

    thoughts terry?

    It can’t be a main residence until after you have lived in it. So it you don’t live in it first it will always be subject to CGT on a proportionate basis. If you later move in and establish it as the main residence and then move out it could be still classsed as the main residence (provided the other requirements met) from that point on for up to 6 years.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

Viewing 8 posts - 1 through 8 (of 8 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.