Property Investment StrategyStructuring

To Restructure or Not to Restructure your Property Portfolio

By 17/03/2022May 19th, 2022No Comments

restructure your property portfolio

What to do if your property portfolio is structured incorrectly

There are two ways you can structure you property portfolio – in a Property Trust or a Company with the Company’s shares held in a Holdings Trust.

It is so important to have an entity own your properties and not own them in your personal capacity. You don’t want any assets in your name. You also don’t want any large amounts of debts in your name either.

The tax benefits in the correct structure are also significantly better. You can learn more about this in our upcoming webinarHow to Pay Less Tax with Property.

But what do you do when you already own a property or multiple properties in your name? Should you restructure your property investment portfolio or not?

The short answer is yes. While restructuring can become expensive, it is necessary because the longer you delay, the bigger your problem will become and the higher your costs.

There are three main advantages to restructuring your property portfolio.

Firstly, you get the assets out of your name. Secondly, you get the debt out of your name. Lastly, you get to finance the properties at their new market values in the acquiring entity.

Keep in mind that restructuring means you will need to incur transfer fees and new bond registration costs.

With a more affordable property with insignificant capital gains since the acquisition, one can restructure a property by simply selling the property to your structure.

With a more expensive property with significant capital gains since the acquisition, transfer duties and capital gains tax become too much. One could then look at transferring the property to your structure as an asset-for-share transaction (Section 42 of the Income Tax Act) instead of selling the property to your structure.

An asset-for-share transaction makes it possible to transfer property from your name to a private company without paying income tax on capital gains or transfer duties by allowing a person to transfer properties to a new company in exchange for shares issued by the company.

Refer to our entire article in the Real Estate Investor Magazine, in the link provided below, where we elaborate further on this subject and provide practical examples.

It is imperative to have a trust structure in place when you restructure your property portfolio.  Read our article, Not Having A Trust Is The Biggest Mistake You Can Make.

In the end, property investment can be lucrative and rewarding (and just plain fun) when your property investment portfolio is structured correctly!

Read the entire article in the March Edition of Real Estate Investor Magazine.