From looking at the area you want to buy in, considering whether to buy a home, unit or apartment; and tossing up whether you want an older home that requires renovations or a newly built home – there are a lot of key decisions to be made when buying property in Perth.

On top of that, you will also need to consider what entity to purchase the property under. In this article, we are exploring purchasing entitles, and the different structure options you have for property ownership.

Here are the primary structures found amongst purchasing entities:

 

#1 Individual:

People who purchase properties as an individual are typically looking for the simplicity and affordability that comes with this type of transaction. If you’re thinking about buying your first home, it may make sense to go through a bank or other lending institution since they will have better rates. Of course, there is a downside to this structure. When purchasing as an individual – that is to say, without a company or a trust involved – your financial and legal responsibilities are not limited or protected. This means that the individual owners of the property are liable legally for the property.

 

#2 Joint names/ownership

Joint ventures are a great way for friends and associates to pool their funds in order purchase investment property. This joint effort lowers the barriers that would otherwise exist if purchasing on your own, as you can combine yours with others’ deposits when applying for loans. This also allows more individuals involved in the property purchase, and may lead you down an easier path towards bank approval.

However, there does come some drawbacks. If there is no formal agreement that is set in place with regards to the ongoing costs of the property, things can quickly turn pear-shaped.

 

#3 Company

One way to limit your legal and financial liability is to purchase property as a company. A company may attract a lower rate of tax on any net rental income from the property, and individuals will (to an extent) be protected from liability. The negative aspects of buying property include not receiving the 50% CGT discount, that capital can be hard to access, and that any losses incurred can only be deducted from future income. Furthermore, a company can be quite expensive to set up and maintain.

 

#4 Trusts

There are many benefits to setting up trusts, and purchasing your property within a trust. Firstly, trust entities can protect the legal and financial liabilities of parties involved in the property purchase, while also offering ways for their assets be protected. Although it can be complex to initially set up, if done right, these entities might just save you money down the road.

 

#5 SMSF

The increased popularity of purchasing property through Self-Managed Superannuation Funds (SMSF) is due in large part to their ability not only save you time and money, but also offer tax advantages. Pooling your assets with other parties can increase borrowing capacity while using them for investment purposes may allow the preservation or creation of earnings within a fund without subjecting it too heavily upon return–allowing more funds available down payment on that dream home. However, there are restrictions when managing an SMSF towards buying real estate because certain guidelines must be met before registering this type transaction as well.

 

Are you ready to speak to a team of investment professionals, who can help you get the best residential or commercial property in Perth? Then talk to our team of Perth property experts today.  Explore our for-lease listings here.