Question: I’m want to buy an investment property with two good friends of mine so we’re thinking of setting up a Joint Venture (JV) arrangement. Can you please advise on the best way to establish a JV trust? What should I know before I commit?
Answer: First of all, the obvious: buying property with friends can be fraught with danger. Having said that, the main thing to watch out for is how to get your money out. Issues include: what if someone is paying extra (deposit, etc) or spending more time than the others – how do they get a better return? How are major repairs paid for, what about future renovations, what is the exit strategy and how will property be valued? Can you refinance, how will funds be distributed and in what proportions, will loans be joint and severable or severable only, etc?
We often see one party wanting to exit and the other not (are profits distributed differently if someone exits outside of agreed terms?) so buying in your individual names would trigger stamp duty and capital gains tax (CGT). If you buy in a trust, then you avoid stamp duty (except maybe in Queensland).
Buying in a trust has land tax implications, especially in NSW, and depending on your objectives (buy and hold versus trade), different trusts would be contemplated. The above list is nowhere near exhaustive but shows a sample of issues which you should consider.
When purchasing together with others – either individually or in a trust – we would recommend you seek legal advice and enter into a formal and detailed agreement, setting out the terms and conditions including roles and responsibilities of each party, and include an exit strategy.
– Answer provided by Ken Raiss, Chan & Naylor Accountants (www.chan-naylor.com.au)
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
Top Suburbs :
Get help financing your investment
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.
We value your privacy and treat all your information seriously - you can check out