What is the best structure to use for JV partner property portfolio

Hello

I was hoping to get some assistance in relation to the best way to structure a residential property portfolio with a jv partner. We will be starting from scratch.

We both will be outlaying initial capital, although my jv partner will be using their serviceability to secure mortgage debt as I do not have any serviceability. The portfolio will be owned 50/50 and we will both contributing to any ongoing costs the portfolio incurs throughout the venture.

My role = capital outlay, identifying properties and acquiring them.

Partners role= initial capital outlay, serviceability

The portfolio will aim to be neutrally geared, and we are aiming to find growth assets and leverage from the portfolio as it grows in value to acquire further properties and then eventually sell down the portfolio over the 7-10 year mark.

Any guidance or ideas on how we could structure the portfolio without it affecting my current serviceability or future serviceability would be much appreciated.

Thanks in advance

Jack

 

Why does your JV partner need you?

 

Lenders are going to see through most entities that you could use. That means most structures are going to make you also liable for the loans (by way of personal guarantee if not actually on the loan) so it is likely to impact your serviceability.

You are going to need to ensure that your structures are setup to isolate your JV stuff from each of you and also (oft forgotten) to isolate each of you from your JV.

I would be looking at a multilayered structure to secure your contributions of equity also.

Above is not specific advice.

 

Even if you could figure out a structure, how much property will you put into this? Is it worth it? Why dont you have any serviceability?

 

I take it you are usingThis is l JV in the general sense. But This is like asking what the best medicine is for a sore head. It will depend on the diagnosis.

You might be able to lend one entity the deposit money and for your mate to make the personal guarantee - but would he like it if he took all the risk?

You might be able to have one entity with both of you giving guarantees - but if your income is not needed that is just added risk pointlessly.

You might be able to use two discretionary trusts as tenants in common or 2 companies as tenants in common.

Perhaps a partrnership of companies

Perhaps a SMSF

A unit trust with either a individual/trustee of a DT/Company/SMSF owning the units

Personal names perhaps - maybe partitioning at perchase.

Perhaps a combination of the above.

 

Thanks Terry and RPI, that makes sense and I appreciate your assistance with this.

So if I am maxed out, but have capital, could I form a new trust with my jv partner and get them to guarantor the loan? If so, how would you suggest the structure of the trust be set up? Would I be the trustee and the jv partner be the director?

Any further help is much appreciated.

Regards

 

You need specific legal advice. If after controls a discretionary trust you may never see any income