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1 LAQC per IP

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  • 1 LAQC per IP

    Hi All

    We recently had a pow wow with a well respected assett protection advisor who told us to form a new LAQC for every property purchase. The reason being that once the property becomes positive and has used all or the majority of its depreciation value, then its an easy share transfer to a trust.

    This makes sense as we are trying to think outside the common square at the moment of instant riches. Does anybody have some further input on that and if any brokers read this, does that complicate the loan structure with cashflow and equity being locked into various entities??

    Kia Ora :P

  • #2
    I think this is a little excessive. If you include the $1000 + per year that you will be paying accountants for each company tax return etc (or your time if you do it yourself) you will find that the cost probably outweighs the benefit, unless each if your IPs is in the $1m bracket!

    Have you considered setting up a new LAQC every year or two and putting the properties into groups? I've heard suggestions recently that have been attributed to Matthew Gilligan that you should limit each LAQC to $1m or less.

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    • #3
      I agree that it sounds a little excessive.

      Do a few forcasts on a spreadsheet to see what effect it will have. Re the tax saving lost from having multiply properties in one LAQC. Add in the compliance costs and see how it goes.

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      • #4
        I talked to my accountant about this sort of thing today.

        The thought was that you group together properties that will become + around the same time in each company. That way you can transfer them all over at the same time and avoid all of the individual costs.

        Seems to make sense.

        Regan

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        • #5
          Like Regan my accountant advised to group similar property's going + at the same time.
          Which obviously will vary depending on the types, yields etc...

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          • #6
            I would agree that their is generally no need to hold properties in seperate LAQC for most investors.

            Since I am an accountant and a prop invester I guess I can share my dirty little secret. All my props are in my wife and I own names, Thats right no LAQC no trust. You do not always need to do LAQC or TRusts etc why. Becuase in the majority of cases

            1. You have no other income apart from rents and salary thus likleyhood of litigation against you (unlike if you had a busness) is neglible. Thus there is no need for asset protection

            2. If you have no other business interests there is no need to have seperate holding entities for asset planning purposes

            3. Most of us run our properties at a tax loss and so there is no advantage in paying for some other holding mechanism

            4. Most people do not hold properties long enough to go cashflow positive or becuase they are building a portfolio and always negativer anyway

            5. In my case by good planning I always have managed to declare under $60k pa and thus keep my tax down below 39c. Although I always my my provisional based on 39 t be on the same side - unfortunatly this wil not go on for much longer

            Really for the average Joe providing you are a wage/salary worker you may as well own the properties in your own name it saves money on accoutants and lawyers.

            After saying that, the flexibility of LAQC with share transfers and unfortunatley with a shortness of personal relationships, marrage and the like a degree of certainty of personal assets is provided. Thus it is usefull but a toss up for the salaried investor.

            Having said all that With my growing personal business interests (ps Watch for my Champagne imports in a few months) I will soon (after 15 years of investing in IP's) be transferring to LAQC and trusts for asset protection reasons

            This is a quite brief comment and to give it justice would require a few pages to talk to it in detail

            Conclusion: If your salaried, married or in a long term relationship there is nothing wrong with personal ownership. However the price to pay for an LAQC is not substantial in relation to the cost of you assets (my "basic" clients pay $600- $800 in first yr for 2 people and $500 - $600 thereafter for accounting, more if complex) rather than $1000. And the LAQC will of course set a mechanish in place if you do plan to change you circumstances in time

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