5 Steps for getting your property portfolio to become amazing | Family Business Accountants Perth | Perth Tax Accountants

Owning rental properties is a great way to accumulate long lasting wealth, while at the same time diversifying your investments.

Investing in real estate can provide solid returns. However, real estate investing is not about making money fast. Investing in rental real estate is an excellent way to build long-term wealth for you and your family.

Investing in rental properties isn’t without risks. Therefore, it’s essential to correctly plan your family’s property portfolio.

What is a property portfolio?
A property portfolio is a collection of real estate and property investments that are owned by an individual, a company, a trust, partnership, or a combination.

However too often people will jump into the asset structuring of a property portfolio.  And while that is incredibly important the purchase needs a lot more thinking and planning to get a great outcome towards your family and the legacy you want to create.

Planning your property portfolio

Before you begin buying properties and building a real estate portfolio, you should carefully plan and develop an investment strategy. Carefully planning your property portfolio can be the difference between success and utter failure.

Develop and investment strategy

The first step in planning your family property portfolio is developing an investment strategy. Think about your needs and your long-term goals for investing in real estate and rental properties. What are your goals? Would you like to increase your cash flow? Perhaps you want to build long-term wealth.

You want to be clear about your goals and your family’s needs before you begin building a property portfolio. This will help you choose properties that align best with your overall goals.

Your family property portfolio should be aligned with the family values and goals.   Real estate is a large investment so make sure that everybody in your family is on track with the decision.

Diversification

As with any investment portfolio, the key to long-term sustained success is diversification. When it comes to real estate, this means investing in properties that are scattered throughout a region, city, or geographical location.

When developing a property portfolio for your family, you should make the same efforts to diversify and plan as though you’re a major corporation and not a family collective. This ensures that your family’s property portfolio has the best chances for long-term growth.

Learn about real estate investments

You may know a little about real estate investing but unless you’re an expert, there is always something new to learn. Do you know the different types of real estate investments? Do you have the time and skill to manage certain property types? If not, it’s best to familiarize yourself with real estate investment areas and decide which property types coincide with your investment strategy.  

The following are popular real estate investment choices:

·        Residential Real Estate
      Investing in residential property involved purchasing a residence and making improvements to the property. The residence is then either sold for a profit or rented for monthly income.

·         Commercial Realty – Commercial real estate involves purchasing commercial properties, such as apartment and office buildings. This type of investment may require more maintenance and upkeep but provides a steady income stream.  

·        Land banking – Buying plots of land can be lucrative, especially if developers show interest in the property. Raw land is a great long-term investment because land values often appreciate; however, there is no significant money to be made from leasing the land.

Look at property forums like www.propertychat.com.au for free advice on property development.  You will also find great advisors on websites like that to assist you.

Tax planning
There are always tax issues to consider when investing in real estate. Planning can save your family hundreds, if not thousands in taxes on your investments. Taxes, such as stamp duty are unavoidable costs associated with investing in real estate. However, planning can greatly reduce stamp duty costs.

For instance, investing in residential properties might result in a lower stamp duty than investing in commercial real estate.   Likewise stamp duty rates is applied at marginal rates – so buying multiple lower value properties will trigger a lower stamp duty bill than one large value property. 

Likewise land tax planning in a similar vein can create surprising outcomes.

If the governments Small Business Capital Gains Tax Concessions are applied great outcomes, incorporating your superannuation fund, can be enjoyed. 

This is something you should always consider before buying properties and building your family’s property portfolio.   

Estate planning and exit strategies
When it comes to a family portfolio, having an estate plan is critical. How will members of the family equally share a property?  If the next generation want to go their own ways owning a number of smaller properties will make the estate planning process easier than one large asset. 

Divorce, bankruptcy, and different financial goals can result in animosity among children and other relatives. Planning for these types of situations can help avoid any hostility within the family.

Likewise the long term planning might be to sell the property capital in retirement.  If the property portfolio is broken into several smaller holdings the capital gains tax bill can be spread over a number of years. 

Creating a committee or divesting property assets to certain individuals can be the key to simple, effective estate planning.

Final words

Planning your family’s property portfolio can be the difference between success and failure. Planning your family’s property portfolio, the right way ensures that you can accumulate long-term wealth, ensure that your business property has a secure tenure, save on taxes, and avoid fights amongst family members. If you have doubts about your ability to plan your property portfolio, seek the help from an advisor or tax professional who can provide you with invaluable insight and guarantee that your family has long lasting success.

About Westcourt

Westcourt is a firm of family business accountants based in Perth.  We have one focus – making family owned businesses great.  That one focus gives us a deep understanding of the drivers and motivations behind families in business.  So email the director at ross.forrester@westourt.com.au or go to www.westcourt.com.au for great advice on taxation, succession planning, family business, superannuation and succession planning.