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> Financing - Properties bought under a company, Need to refinance some props for tax Investment

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fat313
post Mar 13 2009, 08:49 PM

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A sdn bhd is one of the better ways to hold your properties and save you lots of $$$ in terms of taxation if only you have many properties of high values.

If you could find a malay partner for the company (together with some special arrangement), you can enjoy even more benefits.

This post has been edited by fat313: Mar 13 2009, 08:50 PM
SUSjasonhanjk
post Mar 13 2009, 11:02 PM

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QUOTE(Pai @ Mar 13 2009, 05:06 PM)
the idea is to pay zero tax tongue.gif
And that's not for a layman. brows.gif

I also want to find such banker.
They do exist and have direct connection to the lender.

This post has been edited by jasonhanjk: Mar 13 2009, 11:05 PM
meejawa
post Mar 13 2009, 11:22 PM

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QUOTE(fat313 @ Mar 13 2009, 08:49 PM)
A sdn bhd is one of the better ways to hold your properties and save you lots of $$$ in terms of taxation if only you have many properties of high values.

If you could find a malay partner for the company (together with some special arrangement), you can enjoy even more benefits.
*
You hit the nail my fren...there're 3 key phrase in your posts which pretty much summed up the whole topic...

are you currently doing the same thing? mind to share your strategy for your investment?
Phoeni_142
post Mar 13 2009, 11:32 PM

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QUOTE(meejawa @ Mar 13 2009, 06:09 PM)


All depends on the banks, especially nowadays hor banks are so reluctant to give >80% financing, not because they can't due to purchase under company, but because the max margin itself that they can give. What to do, blame everything on amelika la hahahah

In good times, they can give up to 90% (I didn't ask for more la..should hor? smile.gif). Foreign banks are more flexible in this regards (if follow rules la)..If no follow rules you can get >100% with local banks also, but rate sucks laa..and "more upfront investment"  brows.gif

SCB always give low margin wan, but they're my fav bank, citi and hsbc also similar, but all can haggle wan with the approving managers.


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Really? SCB is also one of my favourite banks.....but I must confess that I was misinformed about the whole subject! So pai sei.... Great thread.

Always thought that when u applied under company name - automatically will be kicked to SME banking as a commercial loan. Great to learn that's not the case.

Do agree with you on haggling with the approving managers though. tongue.gif

SCB now - very kiamsiap. I only have 2 biji loan with them - now 3rd biji with them - also want to cut me to 80%.....cheh.
merce
post Mar 14 2009, 04:06 PM

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this is getting interesting...

but i thought all mortgage loan under a company will be finance under commercial loan unless the company is under sole-proprietor ship?

or did i miss something? blink.gif
TSPai
post Mar 14 2009, 10:10 PM

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QUOTE(merce @ Mar 14 2009, 04:06 PM)
this is getting interesting...

but i thought all mortgage loan under a company will be finance under commercial loan unless the company is under sole-proprietor ship?

or did i miss something?  blink.gif
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this varies from banks to banks. smile.gif


Added on March 14, 2009, 10:23 pmthe more I think of it, the more I think this method is a MUST for the long term property investor. Its the best way to have you cake and eat it too ........... smile.gif

This post has been edited by Pai: Mar 14 2009, 10:23 PM
mguivono
post Apr 25 2009, 04:52 PM

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mind sharing any other excellent benefits apart from what fat313 mentioned?
would like to know more about please, am learning also
SUSjasonhanjk
post Apr 27 2009, 08:58 AM

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Pai, here is a blog about this subject.

Should you invest in real estate through a company?

» Click to show Spoiler - click again to hide... «


This post has been edited by jasonhanjk: Apr 28 2009, 08:33 PM
Minolta
post Apr 27 2009, 11:10 AM

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QUOTE(Pai @ Mar 13 2009, 05:06 PM)
the idea is to pay zero tax tongue.gif


Added on March 13, 2009, 5:17 pm

u know anyone?  smile.gif
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The only way to pay zero tax on rental income is either: -

1. Show no net profit on tax return form
2. Do not declare your rental

The above 2 can be either authentic or illegal. Either way, I think most investors are more interested in the "illegal" ways. I mean, admit it, we all do it, small or big amount doesn't matter. The only thing is not to get caught. And since there are so many tax submissions every year, we all think that the chances of being scrutinized by Income Tax Dept is very low, so we do it with some confidence.


I have ventured on this idea of forming a Sdn Bhd to manage my rental income before, but gave up as it was too problematic and expensive. I have noted that the primary business of such a company is Investment Holding Company, and falls under the tax scheme of such. While capital allowances are fully deductable, deductions for others are very minimal....ie you cannot buy a car to drive or get a maid and say its part of the company and get a deduction. You cannot go for expensive meal with your family and put it under company entertainment fees and get a deduction. IRD is too smart for that. Then there the tax portion. Yes, maximum tax is 20%, but the money will be in the company. You can only use the money for more investment or buy another property(of which the lawyer fees, stamp duty is all deductable). But should you want to transfer the money from company account to your personal account, then you will have to declare a dividend on yourself......which means you will have to put is as dividend income under your personal tax return and that is taxable....so kinda like double taxation! The company secretary is expensive.

Best thing is to get > 4 properties and declare those all under business income in your personal tax return. Then all the properties can share profit/loss and expenses etc. Much more simpler, cheaper and lesser tax and headache. But unlikely zero tax. If really zero taxable, then it would mean we've actually made bad investments.


sharing,
minolta


SUSjasonhanjk
post Apr 27 2009, 12:14 PM

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One way to take the money out tax free, re-finance.
Always borrow, don't bother to pay off the mortgage.
TSPai
post Apr 27 2009, 02:01 PM

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Great stuff, Minolta and Jason. smile.gif
meejawa
post Apr 27 2009, 08:23 PM

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QUOTE(Minolta @ Apr 27 2009, 11:10 AM)
The only way to pay zero tax on rental income is either: -

1. Show no net profit on tax return form
2. Do not declare your rental

The above 2 can be either authentic or illegal. Either way, I think most investors are more interested in the "illegal" ways. I mean, admit it, we all do it, small or big amount doesn't matter. The only thing is not to get caught. And since there are so many tax submissions every year, we all think that the chances of being scrutinized by Income Tax Dept is very low, so we do it with some confidence.
I have ventured on this idea of forming a Sdn Bhd to manage my rental income before, but gave up as it was too problematic and expensive. I have noted that the primary business of such a company is Investment Holding Company, and falls under the tax scheme of such. While capital allowances are fully deductable, deductions for others are very minimal....ie you cannot buy a car to drive or get a maid and say its part of the company and get a deduction. You cannot go for expensive meal with your family and put it under company entertainment fees and get a deduction. IRD is too smart for that. Then there the tax portion. Yes, maximum tax is 20%, but the money will be in the company. You can only use the money for more investment or buy another property(of which the lawyer fees, stamp duty is all deductable). But should you want to transfer the money from company account to your personal account, then you will have to declare a dividend on yourself......which means you will have to put is as dividend income under your personal tax return and that is taxable....so kinda like double taxation! The company secretary is expensive.

Best thing is to get > 4 properties and declare those all under business income in your personal tax return. Then all the properties can share profit/loss and expenses etc. Much more simpler, cheaper and lesser tax and headache. But unlikely zero tax. If really zero taxable, then it would mean we've actually made bad investments.
sharing,
minolta
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Not true. You can always pass a resolution to get the money for your own use. Sdn Bhd can shield you from a lot of liabilities. Think in terms of having TWO sdn. bhd. an you'll get the point. And think also when you have children and you want to divide 3 properties to 4 kids. Wealth creation, preservation and distribution are the main reason one wants to use a Sdn. Bhd.

I will say this though, if the cashflow is not that great, you may not want to do this. There are just so many freaking steps to do this, and also consider the costs of maintaining one. But then again, if you're in this for the long haul, this is definitely the way to go (apart from going exclusively for flexi mortgage).

With RPGT abolished, this should be one's consideration.

Purely my 2%*RM1.


Added on April 27, 2009, 8:47 pm
QUOTE(jasonhanjk @ Apr 27 2009, 08:58 AM)


You may also face difficulty to take up mortgages from banks when your company is still young (less than 2 years). And normally banks will offer higher interest rate (0.5%-1% higher than personal’s mortgage) and shorter tenure (< 20 years) for corporate’s mortgages.


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Also not true. In Malaysia, everything is up for negotiations with the banks. I can get same, or better terms even, with purchase under company.

You are buying VIA a commercial entity, NOT buying a commercial entity. When you stress that distinction, it will become easier.

This post has been edited by meejawa: Apr 27 2009, 08:47 PM
SUSjasonhanjk
post Apr 27 2009, 10:03 PM

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I don't remember writing such comment until I saw the article I attach. tongue.gif

Rumor that Malaysia will have an LLC entity, same as the states.

This post has been edited by jasonhanjk: Apr 27 2009, 10:05 PM
TSPai
post Apr 28 2009, 12:38 AM

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QUOTE(meejawa @ Apr 27 2009, 08:23 PM)
Wealth creation, preservation and distribution are the main reason one wants to use a Sdn. Bhd.

But then again, if you're in this for the long haul, this is definitely the way to go (apart from going exclusively for flexi mortgage)

*
Correct. smile.gif

Think many investors start companies to manage properties primarily for wealth preservation. A lot ppl dont realise that a Sdn Bhd is a powerful tool of wealth creation too over the long run tongue.gif


Added on April 28, 2009, 12:41 am
QUOTE(meejawa @ Apr 27 2009, 08:23 PM)
Wealth creation, preservation and distribution are the main reason one wants to use a Sdn. Bhd.

But then again, if you're in this for the long haul, this is definitely the way to go (apart from going exclusively for flexi mortgage)

*
Correct. smile.gif

Think many investors start companies to manage properties primarily for wealth preservation. A lot ppl dont realise that a Sdn Bhd is a powerful tool of wealth creation too over the long run tongue.gif



This post has been edited by Pai: Apr 28 2009, 12:41 AM
koopa
post Apr 28 2009, 01:06 AM

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QUOTE(WaCKy-Angel @ Mar 12 2009, 10:22 PM)
Yeah this is the 1st time i heard somebody trying to reduce tax by this purpose?
lolz using anything that is generating income would have much more tax/interest compared to private/individual person.
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Yeah like what they said above. Just to summaries it, If personal tax is more then 20% (26-27%), then a company is better.

And what meejawa said about the Margin of Finance is true, infact, last year i got a commercial property (shop lot) for 90% with a BLR-2% from Public Bank. This week im hoping to hear them approve 95% MOF for a residential property. With the valuer's help you can get 100%+.

And of course, foreign banks are very flexible. At one time i wanted to get a very expansive property without any tenancy agreement. After gong for 14 banks, one finally approved. Al-Rajhi bank. I find foreign banks can accept almost any value. Local banks' valuer is quite strict.

I wanted to start a company last month, but like Pai, i dont know what to do. But the banker said u will need some extra documents (forgot what it is) and like meejawa said, i can become the guarantor first to start off with the first property then the next one can keep rolling in. The bad part about having a company is...........u have to have some accountant balance the account and u have to declare income tax stuff yourself.

Im no accountant and i plan to study about making a company first before actually starting one. This is a great thread. Please keep the discussion going.

meejawa
post Apr 28 2009, 09:16 AM

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QUOTE(koopa @ Apr 28 2009, 01:06 AM)

Im no accountant and i plan to study about making a company first before actually starting one. This is a great thread. Please keep the discussion going.
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If I may suggest, use the time to sharpen your investment skills, and pay for the time of others to manage your company. You only have so much, and you gotta pick your battle carefully. It's rather subjective, but simply put, you pay RM100 per unit time for others to manage the accounts/sec/tax for your company, and you make RM200 per same unit. Which one would you do?

There's not much to do in day to day running of a property holding company. Have ONE set of documents that are needed by banks, lawyers and agents, and just keep updating them as needed.
koopa
post Apr 28 2009, 10:33 AM

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QUOTE(meejawa @ Apr 28 2009, 09:16 AM)
If I may suggest, use the time to sharpen your investment skills, and pay for the time of others to manage your company. You only have so much, and you gotta pick your battle carefully. It's rather subjective, but simply put, you pay RM100 per unit time for others to manage the accounts/sec/tax for your company, and you make RM200 per same unit. Which one would you do?

There's not much to do in day to day running of a property holding company. Have ONE set of documents that are needed by banks, lawyers and agents, and just keep updating them as needed.
*
Yeah i get what u mean. And i agree with you. I never use my time to find tenants and stuff. Even if i got the place with tenants inside, Im willing to pay some agent to manage them just so that the tenant wont bug me directly from time to time. I would definitely hire someone to do the tax thing. But i think its dangerous to start a company with 0 knowledge. Any book u recommend for me to start one?
Minolta
post Apr 30 2009, 03:02 AM

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QUOTE(meejawa @ Apr 27 2009, 08:23 PM)
Not true. You can always pass a resolution to get the money for your own use. Sdn Bhd can shield you from a lot of liabilities. Think in terms of having TWO sdn. bhd. an you'll get the point.
Do you mean by having one Sdn Bhd owning another sdn bhd which is an investment holding company, which makes the 1st sdn bhd another investment holding company. How would you be able to take the money out?

Please elaborate. I don't really understand.


minolta
TSPai
post Apr 30 2009, 07:57 PM

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QUOTE(Minolta @ Apr 30 2009, 03:02 AM)
Do you mean by having one Sdn Bhd owning another sdn bhd which is an investment holding company, which makes the 1st sdn bhd another investment holding company. How would you be able to take the money out?

Please elaborate. I don't really understand.
minolta
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alternatively u can cashout by "selling" the property to yourself brows.gif . But there will be additional cost associated with this method.



Btw, how come we got no accountants in the propertytalk forum to asssist us? Anyone notworthy.gif
meejawa
post Apr 30 2009, 07:58 PM

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QUOTE(Minolta @ Apr 30 2009, 03:02 AM)
Do you mean by having one Sdn Bhd owning another sdn bhd which is an investment holding company, which makes the 1st sdn bhd another investment holding company. How would you be able to take the money out?

Please elaborate. I don't really understand.
minolta
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You can pass the resolution with just ONE company. Within the company ask all the directors to sign the resolution of money lending with zero interest. TWO companies are for wealth protection purpose.

This post has been edited by meejawa: Apr 30 2009, 07:58 PM

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