Are Companies Becoming a More Popular Structure for Residential Investment Property?
The recent announcements regarding negative gearing have sparked plenty of discussion among property investors.
While much of the conversation has focused on tax implications, another trend is beginning to emerge. More investors are asking whether alternative ownership structures, such as companies, deserve a closer look.
Historically, one of the common objections to purchasing residential investment property through a company was the perception that obtaining finance would be difficult. For many investors, that assumption alone was enough to dismiss the idea before properly exploring the broader advantages and disadvantages.
However, lending policies have evolved considerably over recent years. Today, there are a range of options available for investors seeking to purchase residential investment properties through company structures. While lending policies, deposit requirements and eligibility criteria vary, company borrowing is no longer the niche lending scenario that many investors assume it to be.
This does not mean that a company is automatically the right structure for every investor. In fact, the ownership structure of an investment property should rarely be determined by lending considerations alone.
The Structure Matters As Much As The Property
When investors consider a new property purchase, they often focus on location, yield, cash flow and growth potential. Equally important is the question of who should own the asset.
The answer can have significant implications for taxation, future borrowing capacity, asset protection, estate planning and long-term wealth creation.
A structure that works well for one investor may be completely inappropriate for another. For example, two investors purchasing identical properties may arrive at very different ownership decisions based on their income, existing asset base, family circumstances, future investment goals and business interests.
This is why ownership structures should always be considered as part of a broader strategy rather than an isolated tax decision.
Why Are More Investors Discussing Companies?
The recent negative gearing changes have encouraged investors to revisit assumptions they may have held for many years. As the tax landscape changes, some investors are taking a fresh look at how future acquisitions could be structured.
For some, a company may provide advantages that align with their long-term objectives. For others, individual ownership, joint ownership or trust structures may remain the more appropriate solution.
The important point is that the conversation has shifted. Rather than automatically defaulting to individual ownership, more investors are exploring the full range of available options and seeking professional advice before committing to a purchase.
Finance Is Only One Piece of the Puzzle
One of the most common misconceptions is that the lending outcome should determine the ownership structure. In reality, finance should support the strategy, not drive it.
A structure should first be assessed from a taxation, legal and strategic perspective. Once an appropriate structure has been identified, the financing options can then be explored.
Investors are often surprised to learn that obtaining finance for company-owned residential investment property may be more achievable than they expected.
That doesn't mean every scenario will be suitable, but it does mean that ownership structures should not be dismissed solely because of perceived lending difficulties.
Before You Buy
If you're considering purchasing an investment property in the coming years, particularly in light of the recent negative gearing changes, now may be the right time to review your ownership strategy.
The decision should involve your Accountant, Finance Broker and, where appropriate, your Solicitor.
The goal is not simply to purchase the next property. The goal is to ensure that the ownership structure, finance strategy and long-term investment objectives are all working together.
Because choosing the right property is important and choosing the right structure can be just as important.
Helping business owners across Torquay, Geelong and the Surf Coast secure residential finance that makes sense for their lifestyle and business structure.