Best method for purchasing investment property

Discussion in 'Accounting & Tax' started by Ambrosius, 24th Jan, 2020.

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  1. Ambrosius

    Ambrosius Active Member

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    We have a negative equity PPOR in WA

    we are thinking of buying an investment property in Noosa QLD which we would at some point later move into and potentially turn into a PPOR.

    At the moment we will both be employed. We have 3 small kids?

    What is the best way to buy a property, is it in wife’s name as lower earner, or husbands name as the higher earner, or is it in a trust of some kind. Thinking of tax issues.

    So should both names be on the contract?

    what can I write on the contract offer to purchase at the moment until I find out which is the optimal way to do it?
     
  2. Trainee

    Trainee Well-Known Member

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    this is a terrible way to make an investment decision.
     
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  3. RENI99

    RENI99 Well-Known Member

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    If the question said "we plan to move to Noosa in 5 years and want to purchase now and rent out what would be the best way to buy the property when we are both working and plan to continue to work for xxx? years " - that might lead to better feedback although I expect there is not enough information to answer the question.

    I think planning ahead is a good idea and also purchasing/borrowing when you have jobs is another good idea. But it also depends on overall plans and what you are trying to achieve.

    what does your accountant recommend?
    what sort of numbers are you talking - is property going to be heavily negative geared, etc
     
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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Your comments show you don't understand the consequences of doing things or the complexity.

    You will need to seek legal advice and go through your situation and the affects of various options - there is much more to it than tax.

    In QLD there are also duty consequences to having the name A on the contract but A and B on title. It would probably be double duty.
     
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  5. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I wont expand on Terrys view which is blunt but quite correct. Seek immediate legal (not a conveyancer a solicitor) advice on the contract etc. And all the structure issues (title and loans). Often the manner of finance may also impact this too. eg do you need dual incomes or one to service ? Lenders have their rules eg many no longer tolerate 1% / 99%. Your broker should guide that too. The neg equity and 3 kids etc may all affect finance approval and working with a broker as well early on will be a practical idea. eg Terry does loans and legal and structure advice. I believe those that use him as a broker get an advice (he is a lawyer) discount too. One person many hats.

    From a land tax issue alone the use of a trust may be quite unnecessary for tax purposes and may even quarantine tax losses and lead to major issues for CGT later. eg A main residence exemption doesnt apply to a disc trust.

    Buying a IP today in own name/s that will later become a main residence will mean that property is never 100% CGT free. It will always be subject to pro-rata CGT calc based on time. eg days taxable v days exempt. One upside is while you live there all non-deductible ownership costs (3rd element CGT costs) can be added to the costbase to increase the costbase and reduce the profit that gets apportioned. BUT many people dont know this and dont maintain the records for eternity.
     
    Last edited: 24th Jan, 2020
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  6. Lindsay_W

    Lindsay_W Well-Known Member

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    Are you going to rent or buy in Ballina as you mentioned in your other thread?
    Honestly I think you need to sit down with your partner and think about what you actually want to do, you sound super confused (in my opinion, I could be wrong)
    First things first, see a Financial Planner and go from there. The outcome of that meeting might be that additional property investment is not right for you at the moment - but until you take the time to figure out where you're going it's hard to know the best way to get there.
     
  7. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Financial planners dont actually assist with projections etc. Many think their role is to look at financial budgetting and identifying affordability etc. They generally dont. And some that do use this to spruik their wealth advisory services (ie loans and flogging developer property) which may fail the best interests test. eg a one stop advice shop = buy more property.
     
  8. Lindsay_W

    Lindsay_W Well-Known Member

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    If you read his other post you'll know why I suggested it - also your comment is tarring all planners with the same brush - This is one person that does not need to be put off getting sound financial advice @[email protected] - I thought as someone who offers Financial Planning advice on their website/part of their business you would know that.
     
    Last edited: 24th Jan, 2020
  9. Trainee

    Trainee Well-Known Member

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    based on your other post, this seems wrong and makes your post very confusing.

    negative equity would be if the mortgage is higher than market value.

    it is not dependent on what you THINK the property has cost you.
     
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  10. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    We dont and arent allowed to offer such services. ASIC would hang us and it would be uninsured. Financial budgetting has no license requirement v AFSLs for financial product advice. eg My Budget has a ACL as they deal with financial distress related to borrowing and using finance to clear debt accumulation to lead to financial wellbeing. Financiala dvisers are limited to products defined in their license. I regret to advise that property is unregulated altogether excepting the credit advice under a ACL. And so is financial advice relating to budgeting strangely enough.

    This is how some have been able to penetrate into sectors of markets eg credit clean ups, offering financial plans for property etc. Its all on the edge of legal. Most likely a Corporations Act or ACCC action than a license. And uninsured.

    FYI I think My Budget seem to provide a service for a gap in the market.

    eg My Budget FAQs
    We are not financial advisors and do not offer financial advice. We never offer or sell you financial product advice. We offer recommendations only in relation to your budget and repayment planning. We do provide solutions, structure and support, but for financial advice, we recommend you seek the services of a financial advisor.
     
    Last edited: 24th Jan, 2020
  11. Lindsay_W

    Lindsay_W Well-Known Member

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    Thanks for the explanation, you're getting hung up on budgeting advice (not what I was suggesting to OP) and anyway there are planners that can do both and just because they do doesn't automatically mean they're going to try to push you into wealth creation via property as per your previous post.
    Any Financial Advice would benefit the OP - taking stock in what their current position is and what they're wanting to achieve with investing going forward. Regardless of whether or not that includes budgeting advice...
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Sorry to be so blunt Ambrosis. Wasn't meant to come out that way.
     
  13. Ross Forrester

    Ross Forrester Perth business advisor and founder

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    If you are both employed with young kids and negative equity in your home you should really understand the pros and cons of creating a trust.

    Sometimes a trust delivers no real tangible benefit for people with simple affairs.

    I prefer simple structures over complex ones.
     
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  14. Fargo

    Fargo Well-Known Member

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    First things first, see a Financial Planner and go from there. The outcome of that meeting might be that additional property investment is not right for you at the moment - but until you take the time to figure out where you're going it's hard to know the best way to get there.[/QUOTE]
    He should not see a financial. A financial planner is only some-one who is licensed to give opinion and recommend product, and the odds are the advice wont be good.. A good accountant would be better. An accountant can give advice on asset allocation and give factual information. A consultant that is a qualified accountant with an AFS license would be best and he should have one anyway because he needs taxation advice.
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It sounds like he needs legal, taxation, credit and strategy advice.

    Probably best course would be to read as much as you can and map out a few strategies and put them up here for critique and then get some paid advice for someone - who will depend on which aspects needs advising on.
     
  16. Ambrosius

    Ambrosius Active Member

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    I really appreciate every bodies advice. I will definitely hold back and not buy. I found what was a very high quality house on a huge level block with a bush outlook and which was positively geared. I got an early inspection but 3 other parties went through the high quality house and 1 party put an offer in immediately. I thought to myself this is a worthwhile property to buy but I just did not have any knowledge on how to do it. I asked my self is this the house that can be used to store wealth, the house people will buy like crazy in good times or bad at super high prices, the house everybody would love to buy? With my wife we realised that we need to get the advice that so many on Property Chat have out of pure concern for us, given us to take.
    Thank you everybody, being blunt with the truth is something We value very highly so thank you.

    every day brings another opportunity.
     
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