Property Development

[Nick1984 10]

For other business interests I'm looking to get into property development. Have any of you had experience in this area specifically commercial property?

 

 

Just looking for some info on getting started. Syndication seems to be the best way considering the gigantic capital needed to do this.

[Guest cooter]

There are all sorts of concepts down under which are foreign to those of us in North America:

 

superannuation - Is that a pension?

 

negative gearing - Is that like an upside-down mortgage?

[Nick1984 10]

There are all sorts of concepts down under which are foreign to those of us in North America:

 

superannuation - Is that a pension?

 

negative gearing - Is that like an upside-down mortgage?

 

Superannuation: This is where by law a minimum of 9% of your income has to be placed in a superannuation fund which you cannot touch until you reach what is called your preservation age (55). There are benefits for putting mony in super as the tax rate is favourable. When you retire, you roll over your super into an allocated pension to draw from. Its a "self funded retiree" type instrument held under trust.

 

Negative gearing: This is where you borrow money with the express purpose of taking a loss so that you can lower your tax liability. If you take a loss then that loss is deductible. Interest paid on any investment is also tax deductible. Many people negative gear into property. It's hard for rents to cover interest expenses here most of the time so you cop a loss no matter what you do so that loss will eventually come off your tax bill which helps.

 

If you have a self managed super fund direct property is a great way to build up your super portfolio assets under a cost effective platform. If your fund is managed by an industry or a retail master trust then you can still have property by buying units in a property trust.

 

Lots of people also set up their own specific property trusts to deal in property because of the tax savings as opposed to going in solo. A trust has a maximum taxation rate of 30% compared to our top marginal tax rate of 45% (plus a 1.5% Medicare tax levy) for each additional dollar earnt over $150,000 (and an additional flat tax of $47,850 p.a in that tax bracket).

 

I'm looking of going into property development under a trust structure with a few syndicated partners to offset the large capital expenditure required. I haven't got experience with property yet so I'm hedging my bets by wanting to syndicate so I don't go it alone.

 

My question relates to the experience people have with property development from a legal and administrative sense. Is it very time consuming to do it yourself or have you found it easier to appoint a property manager to take care of things such as rents?

 

Edit: P.s: A up-side down mortgage does exist. That's called a reverse mortgage where you're paid interest by the bank for a fixed term and at maturity the bank then takes possesion of the property. Sounds strange but is a good idea for pensioners who want to downsize their property in retirement and then move into something smaller.

[brendanm 10]

Commercial Property returns have been in decline for sometime in western markets.

 

There will be value to be had in Greece Spain and Portugal, but myself and a friend are looking at the lesser known places in Asia.

 

As growth is still far in excess of our rates over there, the demand for office and industrial space is still high.

 

Please message me if you need anything further