Building An Australian Property Portfolio,
Using Diversification
And Residential Syndication.
Due to the ever increasing price of properties, restrictions on loans, increasing and new duties and taxes, it is becoming harder and harder for overseas based investors to make profitable investments 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, at least 25% to 30% of the price
-Don’t want to pay 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 go through the headache and paperwork needed for a mortgage loan
-Don't want to pay Capital Gains Tax
Syndication offers many benefits
That is why buyers often turn towards "in-direct" property investments, like syndication, joint ventures and development opportunities.
In an investment like a property syndicate, multiple investors pool their cash and join with a syndicator or developer to invest in, or become lender to real estate projects.
This collective contribution, combined with normal bank financing, helps to develop 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.
A property syndication investment model is 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 shorter to medium term investments.
Advantages of Syndicated Property Investment:
Saving Money
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 around 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 could be out of reach.
Diversification
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 (BEFORE you take a loan!) for a small apartment in most cities.
Saving Time
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 architects, builders, agents, town planners,developers, banks, lawyers, tenants, or the Government.
The syndicate managers do all that.
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.
Some of the benefits of investing in residential real estate syndicates may 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 tax returns to complete.
- Low and simple taxes.
- No tax return or tax file needed for foreign investors.
- 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.
- 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).
- 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.
- Diversification of Investment Properties (across projects, states & locations).
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, and can provide expertise in town planning, purchasing, legal, accounting etc.
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.
Expert management.
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 property by the investor themselves
- No ability to create a long term passive income earning potential from individual property ownership
- Investment is not liquid
- No equity available
- No bank lending available
- Syndication investments do not have a long term “never sell” philosophy. Meaning once the project is completed the syndicate will sell and return investors funds plus the agreed in advance return or profit share.
