Buying Property as a Company or an Individual: What’s the Best Structure Option For You?

property keys and small house on company desk

When it comes to buying a property, there are a few key things you need to take into account. One of the most important decisions you’ll make is whether to buy as an individual or as a company – or even in a joint venture, trust or a self-managed super fund.

Here’s a helpful guide on the pros and cons of each option.

Buying Property as an Individual

Buying as an individual (or with a partner or spouse) is typically the most common and cheapest way to purchase property.

Buying as an individual involves a simpler process than applying for a loan as a company. Individuals purchasing property for the first time are eligible for the first home owner grant. This grant offers a full or partial exemption on transfer duty.

The main downside of buying as an individual is that you’re personally liable for the property and any debts associated with it. For example, if you can’t make your loan repayments and the property is sold, your creditors could come after your other assets, including your savings and your wage.

Buying Property in a Joint Venture

Buying property in a joint venture has many benefits, but it’s important to understand the risks involved before you take the plunge.

A joint venture is a business arrangement in which two or more parties agree to cooperate in order to achieve a common goal. In a real estate joint venture, the parties typically pool their resources in order to purchase property or develop a real estate project.

The most common reason people form joint ventures is to pool resources to buy property that they wouldn’t be able to afford on their own. Joint ventures also offer the opportunity to spread the risk involved in a real estate investment among multiple parties.

Of course, there are also some risks associated with joint ventures. One of the biggest is that disagreements among the parties can often lead to legal disputes. 

It’s important to have a clear understanding of each party’s roles and responsibilities before you enter into a joint venture agreement. You should also be aware of the tax implications of your joint venture.

Buying Property as a Company

Buying property through a company is a smart approach if you’re looking to limit your legal and financial liability. 

When you buy property as a company, the company becomes the owner of the asset. This means that if the property is ever sold, any capital gains or losses will flow through to the company. This can be helpful in terms of limiting your personal financial liability if the property is ever sold at a loss.

However, when you buy through a company, you’re not eligible to receive the 50% capital gains tax (CGT) discount that is available to individuals. Additionally, if you haven’t already, you’ll need to set up a company to purchase the property, which can be a time-consuming and costly process.

Buying Property Through a Trust

A property trust is an arrangement where somebody (the trustee) holds the legal title to the property for the benefit of another person (the beneficiary). 

Similar to buying as a company, the main advantage of buying a property through a trust is that it can protect the legal and financial liabilities of the parties involved. It can also make dividing of profits from the sale of the property much easier.

Although a trust is eligible for the 50% CGT discount, it cannot claim the first home owner grant. Also, for negatively geared properties, the losses cannot be offset against the beneficiary’s other income.

Buying Property through a Self-Managed Super Fund

Purchasing property through a self-managed super fund (SMSF) has become increasingly popular in Australia over the last few years. 

The two biggest advantages of this option are that investors gain greater control over their investments and that SMSF’s provide significant tax benefits. You also have increased borrowing capacity, as you’re pooling from a larger source of assets.

The issue with super is that it is tied up in the property. This means you don’t benefit from negative gearing, and it can be more complicated to set up and manage.

So, What’s the Best Option for You?

It depends on your individual circumstances. You’ll need to account for a number of factors, including your financial goals, your investment strategy, your tax situation, and your risk tolerance. 

It’s also worth mentioning that you should always seek professional advice before making any final decisions on a property. 

Find the Right Option With Sharp Property Buyers

At Sharp Property Buyers, we can help you identify the right structure for your property purchase. We have a team of experienced professionals who can provide you with expert advice and assistance, tailored to your specific needs.

Contact us today to find out more information on how we can assist with purchasing a property on the Central Coast.