Joint Venture Set Up's

[ScottyB]

I have a JV partner in the UK who has worked with me previously to buy a number of properties on a buy and hold strategy (Below Market Value)

He is looking to get involved with me here in Australia and i am really interested in how people have set up such arrangements over here?

Do you use company structures or Hybrid Trusts or some other way to protect both parties?

The strategy will again be multi properties looking for CG over a 5-10 year time frame CF+ where possible.

Like our UK venture we would look to protect each other against unforseen circumstances e.g. 1 partner "needs" to sell his share of the venture due to financial or family difficulties, other partner gets first refusal etc.

We would start with a lump sum each followed by regular monthly cash injections

Really interested to hear how people approach this scenario?

Regards

ScottyB

 

[Terry_w]

You need to consider a heap of issues such as
1. taxation
2. asset protection
3. estate planning for death, divorce and disability, bankruptcy
4. stamp duty
5. flexibility
6. Loans
7. Administrative ease
8. Land tax

What sort of trust there is between you possibly a discretionary trust would be the easiest structure. This will give asset protection, tax flexibility, estate planning ease and no stamp duty if one of you wants out. But it will result in land tax.

 

[ScottyB]

You need to consider a heap of issues such as
1. taxation
2. asset protection
3. estate planning for death, divorce and disability, bankruptcy
4. stamp duty
5. flexibility
6. Loans
7. Administrative ease
8. Land tax

What sort of trust there is between you possibly a discretionary trust would be the easiest structure. This will give asset protection, tax flexibility, estate planning ease and no stamp duty if one of you wants out. But it will result in land tax.

Thanks for the reply Terry, Really appreciated.

Does anyone have tips for who they would use to set up such a structure?

I have done some research on here and elsewhere Chan & Naylor seem to get some mixed press on their PIT.

Who else offers Hybrids or Discretionary Trusts that either use or support this forum and other members can recommend?

Regards

ScottyB

 

[Terry_w]

Only lawyers should be setting up trusts and structures because it involves legal advice. AS well you should get some tax advice too. Especially because one of you associates is a non resident for tax purposes.

 

[Timriley]

Hi Scott,

I've set up a JV which sounds like it could be similar to the one you would like to set up with your partner from the UK.

We used a partnership structure governed by a Syndicate Participation Agreement. This allows individuals to hold their share in whatever legal entity they desire (personal name, hybrid trust, unit trust, discretionary trust etc) and to act as an agent on behalf of the syndicate.

The agreement separates the legal and tax treatments of the properties in the syndicate and so the structure allows the individuals in the group to maximize the tax benefits of property ownership and maximize their borrowing capacity so they can leverage themselves into more investments, inside or outside of the syndicate.

It also covers everything from the powers of the participants, to the rules around contributing capital, to how authorised investments are made and everything else including termination and winding up.

I've personally used this structure to purchase 3 investment properties in a syndicate with 4 members. I've also help others to use it to purchase investment properties and holiday houses. Let me know if you would like some more info...

 

[ScottyB]

Hi Scott,

I've set up a JV which sounds like it could be similar to the one you would like to set up with your partner from the UK.

We used a partnership structure governed by a Syndicate Participation Agreement. This allows individuals to hold their share in whatever legal entity they desire (personal name, hybrid trust, unit trust, discretionary trust etc) and to act as an agent on behalf of the syndicate.

The agreement separates the legal and tax treatments of the properties in the syndicate and so the structure allows the individuals in the group to maximize the tax benefits of property ownership and maximize their borrowing capacity so they can leverage themselves into more investments, inside or outside of the syndicate.

It also covers everything from the powers of the participants, to the rules around contributing capital, to how authorised investments are made and everything else including termination and winding up.

I've personally used this structure to purchase 3 investment properties in a syndicate with 4 members. I've also help others to use it to purchase investment properties and holiday houses. Let me know if you would like some more info...

Tim,

That sounds like exactly the sort of set up that would be needed, i would appreciate if you could email over further details for me to look at, I have set up my profile here to allow other members to email me so if this doesn't work let me know and i will PM over my email address to you.

Regards

Scott

 

[EagerAchiever]

Anybody heard much about Vestey trusts? Apparently Dominique Grubisa is involved with them. Hard or impossible to unravel, any comments or experiences on these?

 

[Terry_w]

Anybody heard much about Vestey trusts? Apparently Dominique Grubisa is involved with them. Hard or impossible to unravel, any comments or experiences on these?

Make it sounds mysterious...

Vesty was an English mega millionaire family who set up overseas trusts to defraud the government of England of tax revenue.

What does she mean by a Vestey Trust?

 

[EagerAchiever]

Hi Terry,

I'm not actually involved with them but was speaking to a guy that I work with who is in the process of setting it all up. You're right regarding the family though and it's ties back to England. I asked him what kind of trust it is but he was unsure. She (Dominique) has links with Stuart Zadel and has spoken at a few events. It will be interesting to see how it all goes and what kind of trust it actually is.

 

[thatbum]

I'm just about to set up a JV agreement for a simple purchase/renovate/subdivide/sell scenario - and simply just using a JV contract between the parties.

I can't see any good reasons to make it more complicated than that.

 

[Terry_w]

I'm just about to set up a JV agreement for a simple purchase/renovate/subdivide/sell scenario - and simply just using a JV contract between the parties.

I can't see any good reasons to make it more complicated than that.

What happens if the other party:
1. Divorces - his wife lodges a caveat on title preventing you selling!
2. Dies - probate 6 months away, how to maintain loan payments, then got to deal with whoever he leaves it to in his will, if there is a will. What about a family provision claim.
3. Bankruptcy or insolvency. Trustee in bankruptcy or liquidator takes over and takes control as your new partner!

 

[thatbum]

What happens if the other party...

I can't see how any of scenarios can be effectively shielded against by a different structure. If any of those happened, the JV would be in trouble anyway from what I can tell off the top of my head.

 

[Aaron_C]

You could spend $20,000 in trusts/companies/appointers/structuring to cover every contingency but then you might as well not invest.

 

[Terry_w]

I can't see how any of scenarios can be effectively shielded against by a different structure. If any of those happened, the JV would be in trouble anyway from what I can tell off the top of my head.

Take divorce for instance - not much you could do there, but a unit trust may allow the trustee to continue on with you dealing with the other's ex without change of legal ownership.

Asset protection against bankruptcy, similar. If a unit trust with each party owning their own units via their own separate entities if they go bankrupt they their units and not the property fall into the hands of creditors. Better still if they hold their units via a discretionary trust as the units may be safe, depending on how it is set up and used.

Death too. When you die your title deed needs to be changed to that of the executor/trustee and then on to the person you left it to. This will cause problems if your partner dies mid project. However, trust assets do not form part of a person's estate so if they had units held by a discretionary trust it would be business as usual. In most states, but not NSW, this would prevent or greatly reduce at least, the likelihood of being effected by a challenge to the will.

Any of these events would cause problems to the JV, but using appropriate structures greatly reduces the effects.

 

[redwing]

From ACA Read the chat transcript - Debt advisor Dominique Grubisa

Dominique Grubisa is a practising Barrister with a commercial law background who is dedicated to helping indebted consumers in this current time of economic crisis.

Also

Dominique Grubisa – 3 Items That Property Investors Need To Control

First of all, we’re interested in tax, is great tax benefits involved in property and we want to maximise that, and minimise our tax liability.

Secondly, there’s borrowing capacity. What entity do we borrow in?

It will depend on who’s borrowing the property, is it a company? Is it a trust? Or an individual?

Either way, the bank would want to know and banks lend easily to certain entities…. and they have a lot of red tape involved in borrowing in other entities.

Finally, we are worried about asset protection. Traditionally, if we own in our own way or some entities that are exposed, then we are sitting ducks. And that’s really important, because most of us store or hoard most of our wealth in property. And our net worth, the bulk of our net worth is made up in property holdings. Let’s face it, property is a great vehicle for wealth and we hold a lot of wealth there.

So it’s got to be right, how do we do it right? How do we balance up those three interests?

 

[MIW]

Anybody heard much about Vestey trusts? Apparently Dominique Grubisa is involved with them. Hard or impossible to unravel, any comments or experiences on these?

This trust is mainly used for asset protection not for use in structuring the partnership business.

 

[RPI]

This trust is mainly used for asset protection not for use in structuring the partnership business.

It sounds similar to something I have been an advocate for people who have existing property in their own name.

Except in her case the property all new property is also all owned in their own name and they just use agreements, caveats or mortgages back to the Vestey Trust.

The problem with that is Land Tax, once you hit Land tax thresholds it can be significantly cheaper to setup a trust for each property then to pay land tax on your own name (NSW DT's aside) + keep adding properties.

Attached is a schematic I use as a gold standard sort of model for asset protection.

Also attached 2 different JV structures, a partnership of trusts and a unit trusts with units held by disc trusts.

 

[affiliate]

Except in her case the property all new property is also all owned in their own name and they just use agreements, caveats or mortgages back to the Vestey Trust.

What exactly is a Vestey Trust? I've come across some audios of her talking about asset protection & she mentioned a Vestey Trust. She said something about being a great trust from the old days in England, but didn't go into details.

 

[Terry_w]

What exactly is a Vestey Trust? I've come across some audios of her talking about asset protection & she mentioned a Vestey Trust. She said something about being a great trust from the old days in England, but didn't go into details.

A marketing strategy?

 

[RPI]

A marketing strategy?

absolutely