Dear all sifus out there,


If you are planning for long term in property investment, when would you start to form the Property holding company?!

A) When you already owned 4 rentable properties by now?!

or

B) By the time you just start in property investment?!

or

C) When all the properties giving a high cash flow of income after the expenses?!


Can any sifus advise on this?1

Thank q very much!

What is the main purpose first. don't just start for the fun of starting.

you want to avoid transfer then from start, since transferring for individual to company will incure stamp if you wait.
if you are doing for estate planning purpose [give to children] don't matter.
if you want to do expenses deduction, don't even start an estate holding company, start a normal company doing some actual business then buy all your property as asset.

i think its about RM5k just to maintain a company file even if you don't do anything. audit fees, filing fees ... you better ensure you have the money or cash flow to sustain it.

go look up limited liability partnership, much cheaper alternative.

ohh... start normal company also can buy property as assets? pardon me... noob here...

Then can the property be purchased before corporate tax?

A company running biz can buy props. An empty company do in onli rental collection can own props. No diff.

1) investment holding company cannot carried lost over to next year
2) normal business can carried lost over to next year
3) you have to proof income to LHDN, so if your only income is rental then you will be count as investment holding.
4) if you only have rental income then wont be bank prime customer so your leverage gonna be limited.
5) normal business you can almost charge everything as business expenses.

you better love tax ...
http://www.kpmg.com.my/kpmg/publications/t...a0053s0060f.htm

you do know the purpose is to expense every bit of profit/income out as expense to neutralized your tax.

I think you might as well have a business that actually sells something first then buy properties. Otherwise its just pointless to start a company for the purpose of buying properties only.

At least thats just me anyway.

This post has been edited by CheesePie: Feb 19 2014, 09:45 PM

Thanks to all Sifu for sharing.

Like that sounds like having a business running and property purchase under this Sdn Bhd is better.
But how if company goes for bankruptcy, would the properties attached be affected?!

I have been running my own company for 7 years in sole pro and just set up a Sdn Bhd for my company last year, which running the same business.

I am planning to get a Sdn Bhd to hold those big ticket property with little tax levied, so seeking some sincere comment from senior investor / tax expert & etc.

The killer of Ihc is the 5% permitted exp allowanable for tax deduction. So even tho u take salary or incur other exp, the exp deduction is limited to 5% of the rental income. The good thing about Ihc at the initial stage is banks give funding based on ur personal income with personal guarantee attached. In Long run when the sdn bhd is free of debt n generate healthy cash flow, u can keep buying without giving personal guarantee to bank. Bank won't fund a aging man but an Ihc won't age.

A sdn bday with running bz is diff risks assessment for banks. They judge the sdn bhd on its own credibility and cash flow. Th exp can be deductible but on separate income source.

yupe, if your company goes bust ... the property go as well.
but then again ... you plan to bust your company of 7 years ?

don't quote me session :
since you have experience running a business.
Start another S/B providing support to your main business.
have your main business engage your second business to do job
your second business would have a steady source of income form your main business.
your main business is the customer of your second business.

example ... open a account firm, since your main business need to engage accountant for annual audit. would be best if your wife is an accountant.
other example ... open a handyman company to repair property ... since your property need maintenance.

so now your second company have a legitimate business ... of 1 customer !! YOURSELF !!

Cocoon bro, thanks for the great info.

The 2 great reason I'd like to have properties under Sdn Bhd is
A) easy of transfer of share (estate planning) in future
B) to borrow no matter how old am I

Kevin bro, thanks for the comment.

I like the idea of you, been thought of this way, form another sole pro company to charge back on the Sdn Bhd, in order to lower down the profit of the main business.
So, the tax could be minimized then, right?!

But my idea is just to open up another sole pro company and not Sdn Bhd. What is your view on this?!

Furthermore, I see most of my client's company, they will have different Sdn Bhd under their group and one of them sure its their property / asset company.

If I were u, set up a Ihc buy a property borrow under sdn bhd with personal guarantee. Banks don't normally lend to a start up sdn bhd even tho is a mortgage loan with owner personal guarantee.

After release the first payment, inject ur bz into the Ihc and make it non Ihc. Becarefully with the 80% income ruling to classify as non Ihc.

Ur rental deduct interest = investment gain only can be deducted against current year losses since it is classied as investment income rather than bz income. Manage it thru ur salary so that enjoy the personal scale tax rate rather than straight 25% tax

Also the downpayment u make for property should put as advances rather than share cap to avoid hitting min 2.5m share cap in order to enjoy 20% corporate tax rate.

Thanks, Ironhide828 for starting this topic.
I planned to start something in this year...since I got 6 properties on hand
By the way, thanks to all sifus for your comment and advice

This post has been edited by alwyn75: Feb 20 2014, 03:08 PM

6 units wow. But if residential no point putting in Sdn bhd Woh. Commercial is more viable .

Why commercial more viable? Residential generate rental as well?

How about LLP? Lower cost than sdn bhd but better than sole pro company? Wanting to start something too but not much info...

Following some general reason to start a company for property purpose

1) Reduction of Tax
- since selling of property involve large sum of money it very easy to touch the high tax bracket if you don't planned well. having a business help you expense everything out hence reduce taxable income.

2) Protection against lost
- S/B is a separate legal entity. if you end up in trouble, debtor/creditor cannot chase after your S/B asset.

3) Ease of transfer
- S/B can be easily transfer via share allocation and the property can change owner easily without going over MOT

4) Higher access to loan ratio
- loan ratio is a function of your earning. business can have unlimited upward earning which make the 80% ratio virtually unlimited source of money.

5) Business don't age
- your track record can be carried over to next generation making wealth accumulation using bank money an easy task.

6) Ease of management
- you can employ professional to manage a business

You are right, my properties, all are residential so no point putting in SDN Bhd.
But how to borrow money in the future when I'm old? Any good advise?

Item no 4)
Correct me if I'm wrong,
I heard that SDN Bhd only can get LTV 60% for residential property while commercial property can be LTV 80%, is that true?

don't matter the %

if you need 600K at 60% ... show them a 1mil income.
if you need 800K at 80% ... show them a 1mil income.
if you show 2 million, you get access to 1.2mil even at 60% ...

its not hard to engineer the 2mil income if you have a few other business pumping job to this one business.

please don't ask any LHDN people to come read this...

Thanks cocoan bro, you are really my Sifu!

Whatever u try to say here, I feel like I understand a little. But when I study further, I know I am not there yet.
You knows the game completely and you know how to play it well.

I think I still need to figure out clearly the difference of IHC and non IHC, to further understand the strategy to use.

Mind if I am asking, a veteran investor, do not only hold the properties in Sdn Bhd but in both (Sdn Bhd and personal) to see how to overcome the loophole of tax, betul kah?!

1) don't think is applicable since most of the property sale is considered as investment hence rpgt kicks in. So income tax is not in the picture. Unless u r owning a property trading company that the gain is consider bz source and corporate tax of 20/25% kicks in. Most ppl want to kena rpgt instead of corporate tax leh....

Bro don think bank will lend uore than the property value . Unless u r taking bz loan to buy property but mind u the interest rate for bz loan is Blr++

That's why you need kickass accountant ... capital expenditure + book value + depreciation ... few term that you may wanna learn up.
business account is all about classification ... lost can be written as gain and gain can be written as lost.

money "tai chi" is not an easy game to play ... business school don't teach you.
if you are good in expensing everything off to your own other company ... where got corporate tax to pay ?

typical development will engage
1) Architect
2) Engineer
3) ID
4) Electrical engineering
5) Construction
6) Accountant
7) Lawyer
8) Project Consultant

chances of it being the same owner ? the registered director can be someone else ...
shareholder don't need to be publish by a company ... you can remain hidden forever.
as far as law and account is concern they are all separate entities.

teaching people to bypass LHDN ...

Assuming ur company has only 2 directors. Wifey and unself. When old age bank oso won't loan to company cos bank needsdirector to b guarantor most of the time. Unless u insert some young blood as director to ensure the company get the loan. Nowadays banks r more cautious.

Hahaha I think I got to learn more from u for a few new terms. May be some ppl with chartered accountant and cfa also need to keep himself up to date.

Young director, I think my kid can joined in then...

Wondering do u knows any good tax company to recommend which is for my Sdn Bhd?!