I just had a wild idea and would like to find out if anything like that is known / used.
Summary of the idea:
To flip a property we set up a structure (company?), buy the IP in the structure's name, and then sell the structure to the buyer. Because the property is not sold there is no stamp duty to pay by the buyer.
Example:
1. Set up a company "FlipWrap # 142"
2. You find a property and negotiate a purchase at $300K all up
3. The company issues 60,000 $1 fully paid shares to you in return for $60K in cash. This will form a deposit.
4. You arrange finance in the company's name for $240K secured by the property but no personal guarantee.
5. The company buys the IP using $60K cash + $240K borrowed funds.
6. You invest another $20K into the company to finance renovation. At this point you've got 80,000 shares.
7. After renovation the IP is worth $360K with $240 owed to the bank.
8. You find a buyer and sell all your shares in the company for $120K ($360K-$240K).
You made a nice profit of $40K on $80K invested. If you held shares for more than 12 months you can claim a 50% CGT discount.
The buyer bought a property without stamp duty and with finance in place.
Although I can see minor drawbacks, such as some running costs associated with the company structure, I can't see any major flaws. Please feel free to scrutinise the idea.
Cheers,
Lotana
Summary of the idea:
To flip a property we set up a structure (company?), buy the IP in the structure's name, and then sell the structure to the buyer. Because the property is not sold there is no stamp duty to pay by the buyer.
Example:
1. Set up a company "FlipWrap # 142"
2. You find a property and negotiate a purchase at $300K all up
3. The company issues 60,000 $1 fully paid shares to you in return for $60K in cash. This will form a deposit.
4. You arrange finance in the company's name for $240K secured by the property but no personal guarantee.
5. The company buys the IP using $60K cash + $240K borrowed funds.
6. You invest another $20K into the company to finance renovation. At this point you've got 80,000 shares.
7. After renovation the IP is worth $360K with $240 owed to the bank.
8. You find a buyer and sell all your shares in the company for $120K ($360K-$240K).
You made a nice profit of $40K on $80K invested. If you held shares for more than 12 months you can claim a 50% CGT discount.
The buyer bought a property without stamp duty and with finance in place.
Although I can see minor drawbacks, such as some running costs associated with the company structure, I can't see any major flaws. Please feel free to scrutinise the idea.
Cheers,
Lotana