Trust or Company? What’s better when buying property?
When investing in property, choosing between a trust or a company is essential. These structures offer distinct advantages over buying property in your name. This is especially true when planning to build a large portfolio. While purchasing property in one’s name can make the gains from a primary residence tax-free, it also carries significant drawbacks. The primary issue is that mortgage payments must be made with after-tax dollars.
The Benefits of Using a Trust or Company
A trust or company structure provides better serviceability with lenders. This is crucial for investors aiming to expand their portfolios. Each property is purchased in a separate entity, ensuring that one property’s liabilities do not affect others. This separation is key to building a substantial property portfolio. Rental income from each property must cover its mortgage and other expenses, which is crucial for maintaining serviceability.
Expert Guidance is Essential
Having a finance broker and accountant who understand these structures is vital. This support helps investors navigate the complexities of trust or company ownership. With each new purchase, previous properties’ liabilities are not considered by banks, allowing for greater expansion potential. This strategy enables the accumulation of numerous properties, bypassing the limitations faced by most individual investors.
Conclusion: Making the Right Choice
In conclusion, the choice between a trust or company structure significantly impacts property investment success. By separating each property into its own entity, investors can manage liabilities and continue to grow their portfolios. Making informed decisions about these structures is crucial for long-term success in the property market.
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