Asset protection and Tax optimisation

Should I use a Unit Trust, Family Trust, a Hybrid Trust or maybe not a Trust at all.  There is no one correct answer to this question.  Each investment scenario and client situation will require a different investment vehicle to maximise asset protection and optimise your tax situation.  You need to obtain advice particular to your circumstances.

A Property Trust (Unit Trust) is a trust that has fixed income distribution dictated by the ownership of the Property Trusts Units.  For example if there are 100 units in the trust and you have purchased 10 units, then you will receive 10% income from the trust.

A Family Trust is a discretionary trust which allows income to be distributed to any beneficiary of the Family Trust according to the discretion of the Trustee and the rules of the Trust.  One of the most significant benefits of this structure is that the income can be changed each year going to the person/s with the lowest taxable income in that year.  One of the downsides is that a Trust cannot distribute losses to individuals.  Losses can only be used by the entity itself.

A Hybrid Trust is a Trust that has fixed capital units (ownership shares) and discretionary Income capability.  These are becoming more popular as investment vehicles due the defined ownership of the capital invested and the ability to distribute income in a more flexible manner than with traditional Property Unit Trusts.

Some people do not use trusts as a property investment vehicle.  If you would like to review your asset protection and tax planning situation we can refer you to one of our Strategic partners on our expert panel.

Buying Criteria

Whether you are buying your own home, an investment or commercial property you must set down the criteria by which you will make you purchasing decision. If you are looking at commercial properties the following are some criteria (not exhaustive list) that you might take into account:

• Position, position, position based on the assessment of many criteria such as emerging population trends, business and mining investment etc
• Modern and well Constructed building – this will give you an attractive easily leased property with solid depreciation prospects
• Calibre of Tenant – the property must be able to easily attract a good quality tenant at a rate that gives your desired return on investment (ROI)
• Ensure that the Lease Document you use has been reviewed by your solicitor so that all the i’s are dotted and all the t’s crossed
• Review current rents of the property and ensure that these are not overpriced as this could distort your ROI calculations
• Look at Value Add Options in the Title of the property – You may be able to subdivide the Title for a parcel of land or an entire building. However ensure that you do your sums so that the ROI is there with the added expenses of this type of activity.

Property Management

Successfully managing an investment property doesn’t just happen by chance. You must have a structured framework to manage your investment property so that you minimise the risk of having a property damaged by a tenant. Damage to a property can range from an accident leading to a hole in the wall through to a tenant trashing a property. How do you prevent this from happening to you? You should do the following things as a minimum strategy to protect the property and yourself:

• Obtain the services of an excellent property manager with a good reputation
• Treat the selection of tenants as if you were employing them to work for you, with interviews, references checks and have in place a lease agreement that helps maintain yours and their rights.
• Ensure you and/or the property manager performs regular Property Inspections
• If a tenant does not pay rent on time and/or causes a nuisance in your street then move them on at the first possible opportunity
• Become friends with the neighbours so that you have an extra pair of eyes looking out for your interests
• Have a good insurance policy so that if all other strategies fail you can at least minimise the impact of a bad tenant on your property and cash flow.

Want to know the whereabouts of a good property manager contact Morpheus Property.

 

Preparing your house for sale!

You are buying a new home. For most people this means that they are also selling a home. A well maintained and presented home will sell faster and give you your best chance of maximising the price you obtain. A person’s first impression of your house will be their lasting impression, as they go away to make decisions about if they wish to buy your home and how much they will offer you.

Performing large and expensive renovations will not necessarily sell your house faster nor gain a better price. It is best to make those cosmetic and easy repairs that will affect the overall impression the house leaves in the eyes of any prospective buyer. These things might include things such as cleaning, painting, refinishing, and other such work. These activities don’t require a lot of money or time, but can make a huge difference to the finish of a property.

Ensure that any improvements or changes you make are not done with just your taste in mind. Remember you are doing this work in order to make the house more appealing for sale. Don’t take on a whole raft of DIY improvement projects. Simply harvest the low hanging fruit that will deliver a clean, well maintained and presented home.

Moving House

You have bought your new dream home, but you now face the nightmare of moving!

Use the following checklist to ensure everyone's kept up to date.

• Friends and Family
• Electricity, gas, phone and garden bag guys
• The kids Schools, preschools and day care Groups
• The Electoral Role so you don’t get a fine for not voting
• Any Professional bodies, unions or groups of which you are members
• Your Bank or Building Society
• Your Accountant, Lawyer or other regular professional service provider
• Insurance companies for health, car and house
• Local Council Authority
• Queensland Transport for your Registration and Drivers License
• Your parole and probation officers
• The Tax Office. Yeah we know, but they need to know for the refunds too
• Store card accounts, like Myers, etc
• Lease, hire or rental companies
• Your employer, particularly the payroll and admin area
• The Family Doctor and Dentist
• Your mother-in-law (optional)
• RACQ, NRMA or equivalent Motoring Association
• The Newsagent
• Morpheus Property (of course) - To make sure you don't miss the next hot property hitting the market.

The Post Office will assist with changing your address. Enquire with Australia Post for further information.

 

Buying

How many times have we heard the advice when considering the purchase of property - location, location, location?

To maximise capital growth and rent return, or just simply to make your busy life more convenient, it is important that the property be close to amenities, such as:

• Schools
• Place of work
• Public transport
• Shopping centres
• Hospitals
• Cinemas, Cafes and Restaurants
• Other Emergency Services

The property shouldn’t be within “earshot” of major highways and railway lines. It is good to be close to highways and train stations, however future tenants or buyers may put off by excessive noise if the property is too close.

 

Buying

Ensure your Contract of Sale is subject to a Pest & Building Inspection and that you are organised so that you can obtain these reports within the specified time. Queensland law requires that the Builder performing the inspection must be licensed by the Building Services Authority (BSA). You can check BSA records at their website.

Your Pest Report should also be from a licensed professional. The building inspection report should cover the soundness of structures; the legality of existing structures on the property; existence of termites, etc. The cost of these can vary widely so ensure you are referred to someone with an excellent track record.

 

Finance

Finance is one area where the lending criteria and products for lending institutions are changing on a daily basis.

When dealing with obtaining finance for property investment go to a professional who can give you advice on the array of lenders and products that are right for your investment decision. Our partner Crediflex is a finance professional who can give you that advice.

 

Investment Readiness

What to do when you are new Investors in Property?

Read everything in sight about property investment. Then gather your own panel of advisors around you to give you that expert opinion when it is needed.

You can’t know everything so ask others to help you on your investment journey.

 

Legal

You should retain a solicitor to do your conveyancing.

While it is possible to do your own conveyancing, the price of a good solicitor is a small price to pay if something goes wrong. Good referrals and past experience are valuable when choosing a Solicitor.

If you don’t know a good Solicitor, contact Morpheus Property for a referral to one of our expert panel.

 

Negotiation

Being a brash and belligerent negotiator with a winner take all approach will almost always fail to deliver the “best outcome”. Stay calm, ask many questions and build rapport with the other side.

Auction

Work out what the property is worth. Research recent sales, set a limit and stick to it!

 

Negotiation

Poor planning (sometimes no planning) is the biggest failing of many negotiators.

 

Tax

Ensure you obtain great tax advice from an expert in their field.

 

Finance

When budgeting for your investment property, allow not only for the purchase price, but also for a range of other costs relating to investment properties.

Rental Readiness

Knowing what information a landlord should request of a tenant is essential.

 

Finance

Find a good finance broker who takes the time to understand your personal and financial position.

 

Investment Readiness

Being investment ready is more than just having pre-approved finance.