Using your LAQC to benefit your relocation plans
Question from Jitesh updated on 13th December 2006:
Our expert responded:
It is possible to sell your home to a newly formed LAQC. Something to take into account is whether or not this property will work as a rental. In other words, if you went out and bought the property today, paying market value for it, would it stack up as an investment property? In my experience, homes rarely make good rental properties because your reasons for buying them are so different compared to buying a rental property. Then, it's measuring your opportunity cost of having your funds invested in this property versus buying another rental property that might work better for you. Assuming that the home will work as a rental property, the next thing to consider is how the shares in the LAQC should be owned. If you were the major bread earner, it would make sense for you to own most of the shares from a tax point of view, rather than merely setting up the share ownership as 50/50. When the LAQC does buy the house from you at market value, it would take out a small mortgage to replace the existing mortgage you have personally. The end result will be that you have lent to the LAQC your equity. When you are ready to buy a new home, then the LAQC can go and get a mortgage to repay you the funds that you have lent it.
Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.