Has anyone found a good way e.g. trust or otherwise, in which to buy property with other people and still negatively gear? We are concerned with complexity and transparency for tax purposes and paying for the property.
You could use a unit trust, with each party holding 1/n of the units where n equals the number of parties involved. Each party borrows funds to purchase units in the unit trust which then in turn purchases the underlying income producing asset. Each unit holder must have equal access to income and capital gains from the trust for the interest on your unit purchase to be deductible. Standard Disclaimer: Do not reply on this information, seek professional advice from a qualified professional.
I agree that a unit trust is probably the best way of structuring this - although a "partnership" would possibly achieve a similar result from a tax point of view I would think ... although much more troublesome if individual partners want to sell down their exposure to the asset (as opposed to individual unitholders in a unit trust, which is much more flexible). The main problem with any structure involving multiple parties (trust or otherwise) is that if you are purchasing real estate, it can be difficult to obtain finance without everyone needing to be jointly and severally liable for the mortgage over the property - which is not ideal. Not saying it's impossible, just that it's more difficult.
Yes, but it is also hard when everyone on the loan is 100% liable for the loan. This is where we are at when it comes serviceability - we need to be able to borrow more money somehow! Also, unit trusts hold onto any loses...can't really afford to do that when you are looking for capital growth. I have heard of the Property Investment Trust (PIT) by Chan and Naylor which allows negative gearing etc. Best of both worlds...unfortunately, it doesn't help with our serviceability issues...
ChrisandK8: The unit trust does allow for negative gearing. As for the Chan and Naylor "Property Investor Trust", I'd suggest searching for an interview that Chris Batten held with them. That may provide more insight for you. As for the serviceability issue, best advice I can suggest is to approach a specialist mortgage broker with experience in the property investment area. There are several who participate on the forum from what I've seen, so it may be useful contacting them, and discussing in the finance sub forum. Regards, Kris
