So you are looking to invest in a cash flow positive commercial property…So, where do you start?

Educating oneself about the environment of the commercial property business would help
enormously when making a decision to invest.

Then it would be prudent to take stock of your current situation, economic and emotional including

1. Current net equity = Asset – liabilities
2.  Emotional position including, Stage of life, family situation, children etc
3. Future outlook including – what lifestyle would you like in retirement, how much income is required to maintain the preferred lifestyle .. this may require some help from a financial planner.. 

While life does not always come with crystal clear vision, it is now possible to consider some business and tax related options including:

• Funding – will the investment be rental positive or negative, how much will the bank lend .. at what interest rate
• What are the marginal tax rate of each owner, both now while rental income is positive and later at time of sale when there is a capital gain
•  Cash flow needs
  • Land tax liabilities
  • Time – how long will the investment be held for
  • Family – children, grand children, ages, legacy
  • Risk – how much asset protection is required, from other businesses, creditors, ATO, ex-partners, marriage breakdown, blended families..
• Reflecting on the above considerations will help progress the process of finalizing a decision regarding which is the best ownership structure would be most suitable for your personal circumstances.

  Is it yourself individually or jointly with your spouse or as tenant in common, with others or your spouse. Should it be a limited liability company or a trust. If a trust, then what type of trust is most suitable.

  Finally, there is also consideration for commercial property to be held in a self managed superfund. While SMSF’s have a lot of advantages due to their low tax rate, the disadvantages also need to be considered including complexity, administration, regulations and government changes.

  When we are asked to assist we usually like to start with understanding the personal situation of the client. This helps with relating to the client in the context of their personal situation, while highlighting alternatives and options.