Purchasing an investment property is a significant decision that requires extensive due diligence and proper legal and financial advice, according to property lawyer ROBERT STARKE.
Our tips for buying an investment property highlight some of the issues that you need to consider and seek advice on.
Purchasing entity and Tax efficiency
A critical factor to consider that is often overlooked is the purchasing entity whereby the purchasers are required to decide whether to buy the investment property in their personal names or consider alternative purchasing entities such as:
- spouse or partner
- unit trust
- discretionary trust
- hybrid trust
- self-managed superannuation fund
These purchasing entity options have a variety of ramifications regarding capital gains tax, land tax, tax deductions, stamp duty, asset protection and estate planning.
It is critical to ensure that your investment property is not exposed to creditors, clients, customers, employees, contractors or any other third parties who may commence legal proceedings against you and/or your business.
If you are a business owner or have a profession with high exposure to litigation then you should establish the appropriate structure for the purposes of buying investment properties.
You should not purchase an investment property in the name of your business trading company or trust because your investment property may then be exposed if your business is sued and/or placed in liquidation.
Seek advice from professionals with experience
It is for these reasons that it is prudent to obtain legal advice together with accounting and financial planning advice to determine the most advantageous purchasing entity and structure prior to proceeding with a purchase of an investment property.
Baker Love Lawyers have extensive experience in acting for both first time and experienced property investors who purchase investment properties in New South Wales and interstate.
We also recommend that our clients obtain professional accounting and financial planning advice and consider engaging a buyer’s agent or property investment specialist to assist with making informed decisions in relation to their investment property purchase.