BENEFITS OF SYNDICATION
Building an Australian property portfolio,
Due to the ever increasing price of properties, restrictions on loans, increasing and new duties and taxes, it is becoming harder and harder for investors to make profitable investment on their own in the Australian residential property market.
The question … what’s the next step for investors who want to keep investing but perhaps:
-Don’t want to (or can't) put down the huge down payments now required for most Australian residential property, now at least 30% of the price
-Don’t want to pay the new foreign investors duties and taxes, 7 to 8%
-Don’t want to pay Stamp Duty, mostly around 5%
-Can’t get a bank loan for the mortgage because of being self-employed, age, unable to provide sufficient income (or other reasons)
-Don't want to pay high interest rates for a loan
-Don't want to pay Capital Gains Tax on selling
Syndication offers many benefits
That is why buyers turn towards in-direct property investments. In an investment like a property syndicate, multiple investors pool their cash to buy, develop, or become lender to residential projects.
This collective contribution, combined with normal bank financing, helps to develop purchase real estate which would be difficult, if not impossible to buy for a single investor.
And if you’d rather not spend your time researching individual properties, researching the market, attending exhibitions and so on, syndication is a great option for putting your cash to work while letting experts do all the work.
The property syndication investment model can be ideal for sophisticated investors that are interested in an alternative to classic property investment that offers potentially higher yields, risk mitigation, increased security and strong returns on medium term investments.
Advantages of Syndicated Property Investment:
The obvious advantage of such an investment is the amount of cash you save not only in down payments but in taxes, duties and charges.
It’s no secret that to buy a decent property in Australia you need a lot of money just for the down payment.
In addition, for foreign buyers, Australia has additional taxes on top of the purchase price of up to 8% on all residential property, PLUS the usual Stamp Duty of 5%.
Then there are the banks fees, lawyers fees, and also possibly the Australian Government FIRB fees.
With the help of syndicates, you can invest in a high quality property that would otherwise be out of reach.
Diversification can be a valuable investment tool. Property investment syndicates can increase your options for purchasing different types of properties.
In Australia, assuming a 70% mortgage, and the usual buyers costs, you would need to invest at around AUD$266,000 (HK$1.5 million, SG$252K, US$184K ) cash for a small apartment in most cities.
When you invest in a syndicate it is highly likely that you will save a lot of time as you won’t have to go through all the research work prior to purchasing a property. Moreover, you won’t have to deal with agents, developers, banks, lawyers, tenants, or the Government. The syndicate managers do all that for you.
Syndicated property investment can be one of the best forms of real estate investing. You don’t have to spend all of your cash in a single property, but you can get good returns from your different properties. If you don’t have enough cash or want to reduce the risk of losing money, you can invest in syndicates and save your time.
Some of the benefits of investing in real estate syndicates can include:
- The syndicator is a specialist in real estate investing with years of experience.
- Pooling resources making quality investments easier to obtain.
- Expert management.
- No complicated Tax returns to complete.
- Low and simple taxes.
- Freedom from management for the investors.
- No Stamp Duty for individual investors.
- No Foreign Buyer Fees.
- No Australian Government Approval (FIRB) needed to invest.
- No FIRB fees to pay.
- No Legal Fees (unless you wish to have your agreement vetted).
- No bank loan needed.
- No tenants to deal with.
- No Body Corporate fees to pay by individual investors.
- No Council and Water rates paid by individual investors.
- No Sales Commission (unlike the normal disposal of properties).
- Diversification of Investment Properties (across projects, states & locations).
- No Repairs.
- No Property Managers fees.
- No Government rates to pay.
- No Capital Gains Tax.
- Short term investment of two to three years.
- Agreed in advance net return.
- Easy paperwork, admin, and tax reporting.
- Strong risk mitigation.
- No Land Tax.
- No Vacancy Tax.
The syndicator is a specialist in real estate investing.
By investing in a real estate syndicate, you take advantage of the experience of the syndicator and their team. The syndicator is a specialist with experience investing in real estate for the benefits of the investors. His knowledge and skills of finding, acquiring, managing, adding value and selling real estate to produce a profit are made available to his investors. The syndicator brings experience and professional management to the investment.
A syndicate pools resources and thus allows acquisition of otherwise unobtainable properties.
The syndicator by gathering several equity investors, plus including bank lending, together makes it possible for the investors to develop larger/better /properties/developments than they could on their own.
Larger properties allow for economies of scale, making professional management affordable that might not be available with smaller properties.
Some Disadvantages of Syndicated Property Investment:
- No actual ownership of the property by the investor themselves
- No ability to create a long term income stream from owning properties
- The investment is not liquid
- No equity build up or redraw of equity available
- No bank lending in it's own right to make the investment
- Syndication investment does not have a "never sell" philosophy- meaning once the project is completed, and/or has reached it's targeted return, the syndicate will sell, and return the investors funds plus any profits.
- Syndicates can fill up very quickly, are not open to the public, often have high minimum investment amounts and only qualified investors can apply
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