Opinions on my situation
- Thread starter china
- Start date
I noticed you said your area of business is not that good an area to invest in.
In this scenario, you are not really in a good position to be that discerning...time is running out.
Leasing is not the end of the world either; you have come into a bad situation due to not having a lease in place. It may be possible to find a vacant building closely and negotiate a shortish lease so you can run the business and search for a suitable building at your leisure.
Most LL's are not in a hurry to chuck out their tenants unless they have wrecked the building and won't fix it, or aren't paying the rent, so I wouldn't be worried by another lease situation.
The investment will be in your business, so to buy a premises to run it from is an investment in and of itself, to me.
The building may not be a stellar performer in CG, but if you are able to pay down the loan, and in time use some equity to maybe set up a move to a better area with better investment opportunities, you could then rent out your building and still be ahead due to the commercial lease and rents you have from it.
In this scenario, you are not really in a good position to be that discerning...time is running out.
Leasing is not the end of the world either; you have come into a bad situation due to not having a lease in place. It may be possible to find a vacant building closely and negotiate a shortish lease so you can run the business and search for a suitable building at your leisure.
Most LL's are not in a hurry to chuck out their tenants unless they have wrecked the building and won't fix it, or aren't paying the rent, so I wouldn't be worried by another lease situation.
The investment will be in your business, so to buy a premises to run it from is an investment in and of itself, to me.
The building may not be a stellar performer in CG, but if you are able to pay down the loan, and in time use some equity to maybe set up a move to a better area with better investment opportunities, you could then rent out your building and still be ahead due to the commercial lease and rents you have from it.
Would you consider trying to mend the bridges so you could stay in the current place, even for a little longer. Maybe offer higher rent for a period of six months to give you time to find something else without rushing like this.
I think that many professionals - medical, legal, accountants - will set up smsf to buy their commercial premises / office and they rent these premises from their smsf. This cannot be done for residential as it is in breach of SIS act - I have obtained advice from my accountant - and have also personally seen this done.
With regards to the financing - lets say 800k property:
I am allowed to make 25k concessional contribution and 450k non-concessional contribution into super. I also will release 150k from first state super.
This allows 620k deposit from smsf. I will then need to lend the remaining 180k from somewhere. My accountant says that either I lend from bank or lend from myself.
They say that they recommend the latter situation as I will avoid bank fees/bank delays and they will draw up agreement with regards to interest payments?
I hope this sounds above board?
The other option that has crossed my mind that may be more simple is that I take out a loan to buy the 800k commercial premise in my own name (deposit secured against ppor and the balance secured against commercial premise) and then just pay interest on this loan and this may well be a simpler structure with easy arrangements for tax deductibility - but few professionals seem to do this. This was the structure I had in my mind for personal investment in IP prior to this situation arising.
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On the one hand you seem extra conservative with your private stuff, but looking to do something seriously right out there at the other end of the spectrum.
I don't get it.
Get advice, soon.
This situation has been forced on me and hence it is completely out of character with what I do but my business is forced to find a premise asap.
I am being evicted due to hostilities with my landlord which have brewed over a few years and hence the eviction is not due to commercial /financial reasons and I cannot delay the eviction under any circumstance as lines of communication have been severed between us.
The situation behind the eviction is like Arab-Jew / Magneto-Professor Xavier from Xmen / Syria- USA - so it is not a financial reason that can be sorted out easily. There are some years of deep seated resentment and hostility.
The problem is that after talking to the various commercial agents in the area, I cannot really find a suitable commercial premise close to where I am right now. There is one empty shell that would cost about 150k to fit out. Once fitted out which would take about six/seven weeks, I would realistically need to stay there for five or more years. As my business does depend on geographic location, every new move is very costly and means loss of business.
Hence, as you put it - time is running out - and the fastest option to relocate my business is 6.5km away where an office suite is reasonably decked out.
Yes, an agreement will be drawn up between smsf as landlord and myself as tenant.
Since you are up for 100k fitout at the 6.5km away premises anyway, is the additional 50k worth spending to remain in the same area as you are now in terms of retained customer income, or reduced purchase price?
RE fitout time, 6-7 weeks is very very slow. I work on business IT relocations all the time, and fitout programs for 150sqm are typically 2-3 weeks. With a good fitout company, its done in no time. Do a 2 month settlement and then fitout in last month, then move in.
This is as I suspected and hence, I wonder whether the following scenario is better for me in term so of buying my office premise.
Borrow from the bank in the traditional way to buy the office, which I will use myself. This means that I will not have to pay any rent and just pay interest to the bank which is fully tax deductible. I can also put spare cash in offset which means minimal interest charges.
Is the above scenario not a far simpler structure and avoids ongoing smsf fees / paperwork?
It also avoids the complexity of setting up the smsf loans structure and contributions debacle.
If I put in 450k in non-concessional contributions, does this not mean that I immediately have to pay super tax (15%) on this when this 450k has already been taxed?
I am not expecting capital gains on this office property and hence the smsf benefit of minimising CGT does not really apply.
Also if I pay the smsf rent, the smsf has to pay 15% tax whereas in the scenario above, I do not have to pay any rent at all.
The area where I am in right now has a 600sqm empty shell which seems suitable. My business requires wheelchair access, certain parking spot requirements(council regulations) and hence my options for properties are limited. Also, for this 600sqm shell, I need to apply for council zoning for my type of business - which I expect needs the services of a town planner - could take up to six weeks with no guarantee of success. I presume there is no point in doing fitout until I have zoning approval. The 600sqm shell is listed for sale at 1mil but agent says that it would probably go for 900k.
So I have been weighing this up with the benefits of staying in my locale versus the office suites 6.5km which seem to be a more guaranteed move in situation within the 3 month time frame.
My problem is that I do not believe that there will be capital gains over time with the office suite.
The SMSF will also benefit from the rent (well excess of rent over interest) being taxed at a lower rate. However you will not have the benefit of that rent in your pocket now- which would also go into servibility for further loans.
However given you high income I'd be guessing that the SMSF would be an advantage. have the accountant run both scenarios past you. I'd tend to trust the accountant.
However given you high income I'd be guessing that the SMSF would be an advantage. have the accountant run both scenarios past you. I'd tend to trust the accountant.
So if I vacate the premises and the smsf receives no rent and no capital gains, then there would still be ongoing costs with smsf. I suspect that my accountant would have a much bigger vested interest in smsf situation.
Whereas with the bank loan situation, my cash in offset would hold the interest charges at bay or I would pay out the loan and end the pain in the scenario of me leaving the premise and there is rental vacancy.
Is there a doctor surgery or something that would work for you nearby where you could rent some space and "park" your business temporarily whilst sourcing a new place, buying it and fitting it out to suit?
And.. I don't suppose your landlord would sell you the place you are in now? (I know you don't get on, but money does talk...)
And.. I don't suppose your landlord would sell you the place you are in now? (I know you don't get on, but money does talk...)
As my business depends on referrals, and any change of address requires notification of hundreds of referring businesses, I can't really "park" my business and move again quickly.
The landlord works in the same building as me and I am leasing out some rooms from him. He does the same business as I do and intends to remain working for at least the next 15 years. He is far more wealthy than I am and does not really need the rent. He owns the building outright via his smsf.
