The first series of articles will be about accounting structure. It is important to realize that there is no one size fits all accounting structure solution that will suit all property development/investment projects. There are a range of factors that need to be considered and each should be looked at on a case by case scenario.
Some of these factors include:
1. Reason for the property development/investment project
- Are you purchasing/building the properties to sell in the short term to make a profit or intend to hold onto the properties long term as an investor?
2. Number of partners in the project
- Are you completing the project by yourself, with family members or with third party assistance?
3. How many properties will there be in the project
- Will the project include 1, 2, 3 or more properties?
- Is one of the properties intended for your own private use and/or be your main residence on completion?
- Is one of the properties intended to be held as an investment while others sold off for a profit?
- Is this a once off project or will be you be undertaking more projects in the future?
4. Size and risk involved for project
- What is the budgeted value for the property development/investment?
- Are you at significant personal risk if the project goes wrong?
- What significant assets do you have in your own name?
- What other investment/business structures do you currently maintain, if any?
It is important to realize that there is no one size fits all accounting structure solution that will suit all property development/investment projects
5. Borrowing requirements
- Are you funding the project from your own cash reserves, investors or bank lending?
- Do you have a good relationship with a bank and/or broker?
- What will you be using as security over the intended lending for your project?
6. Personal tax circumstances
- Do you have a high personal taxable income?
- Do you have non-working family members including spouses, parents and/or children over the age of 18?
- Are you retired or nearing retirement?
7. Experience in property development/investment projects
- How many development/investment projects have you completed in the past, if any?
- Is this your full time job or something you will consider completing over the weekends and any other spare time?
These are just a few of the issues that need to be considered when undertaking projects and contemplating any accounting structure needs and requirements. There are also a range of other accounting issues including Income Tax, Goods and Services Tax, Stamp Duty, Capital Gains Tax that should be taken in account prior to commencing your project.
These are the issues Brent discusses with clients on a daily basis and is happy to do the same for you through your relationship with Your Property Project.