Property Investment Blog

New call-to-action
All Posts

5 Property Investment Ownership Options

This article identifies the ownership options available for investors when considering the journey of real estate investment. As each investor has different financial and personal circumstances some options will be more suited to you than others.

Sole Ownership

A sole trader is the most common ownership option for real estate investors. A sole trader buys and sells investment properties in their own name.

However, this form of ownership is high-risk leaving properties and other business or personal assets at stake if something goes wrong.

Unfortunately, a sole trader cannot take out insurance cover for asset protection.

On the other hand, a sole trader of a rental property allows investors to use negative gearing to significantly reduce personal taxes. Sole ownership also reduces the rate of capital gains tax paid if the investment is sold.

Trusts

A trust cannot be classified as a separate legal person or entity for investors.

A trust is a relationship in which the trustee (investor) holds the title to property (trust estate or trust property) for the benefit of the beneficiary.

A trustee’s role is to manage the property held in the trust in which the legal ownership or assets can be handed onto others without the trustee losing the benefits of the assets.

Trust beneficiaries receive the benefits of the assets (this may be in the form of rental income, capital repayments or even the actual assets themselves) and the beneficiaries are taxed accordingly.

A trust can be a long-term security for personal assets for real estate investors.

A trust is also a great ownership option if an investor would like a property passed down to future generations of their family.

To ensure trust operations are governed and the trust deed is followed it’s recommended a trustee seek assistance from financial and legal professionals from the get-go.

A trust deed outlines the purpose of the trust and will determine its success or failure.

Self-Managed Super Funds

Investors have embraced the concept of SMSFs, in which they take control of their own retirement funds to pursue investment options, most popular being real estate.

SMSF consumers can enjoy many benefits including a lower tax rate of 15% on income and capital gains, or zero tax on the capital gains if the property is sold after retirement.

Money borrowed through a SMSF can only be used to purchase one property at a time and needs to be returned to the fund once the property has been sold.

It’s wise for investors to use their SMSF to purchase either commercial or residential property, as properties with high rental yields pay little tax in the accumulation phase.

Partnerships

Unlike buying investments as a sole trader which is extremely risky and offers no protection to your assets, a partnership is a structured business model in which two or more people pool their capital and expertise to manage a portfolio of real estate investments.

A partnership is a common method for investors because they are able to purchase large real estate investments and combine their skills and expertise to make it successful.

However like any partnership arrangement it requires a fair amount of trust.

Make sure you choose a partner wisely as each of you will be made accountable for all acts made by the other.

Joint Tenancy

Joint tenant ownership is when there are 2 or more owners, and each owner is entitled to the possession of the whole property. 

Before investors embark on a joint tenancy option it’s important to organise financial and legal paperwork, including Wills and protection of assets.

This type of ownership is often considered by those in a de facto relationship who are purchasing property together, but won’t provide equal financial contributions.

When contemplating a joint tenancy option, investors must consider what happens in the event of your passing.

By law, the property will pass to the surviving joint tenants, regardless of the beneficiaries noted in your Will.

Real Estate Investar Editor
Real Estate Investar Editor
Real Estate Investar provides intelligent software, tools and data to help you save time and make money in the residential property investment market.

Related Posts

The Major Banks Expecting Double-Digit Growth in House Prices

2021 has started in strong fashion as most property markets across the country continue to see rising prices. According to the latest data from CoreLogic, house prices are up once again in February and it appears that the big banks are also predicting significant price gains over the next 12-24 months. Month to date, house prices in our major capital cities are 1.2% higher according to CoreLogic, taking the year to date gains to 1.4%. Out of Australia’s five largest cities, Perth has so far been the strongest this year, with gains of 2.4% followed by Brisbane at 1.5%.

How to Find Development Opportunities

Want to learn how to manufacture capital growth through development? This 60-minute webinar, first presented in 2019, will cover some of the key things to look for to create successful deals, as well as what not to do and which deals to avoid. Learn how our leading property investing platform can help you find, analyse and research investment-grade properties for various investment strategies:

Australia Property Prices Continue To Surge to Start 2021

House prices across the nation have carried on where they left off last year, with values increasing in January.