Property Investments

Investment Property is property (land or a building or both or a part) held by the owner or by a lessee under a finance lease to earn rental or capital appreciation or both, rather than for use in the production or supply of goods and services or for the administrative purposes or sale in the ordinary course of business. A property interest that is held by a lessee under an operating lease may also be classified and accounted for as Investment Property if the property meets the definition of investment property and the entity uses fair value model to account the investment property. An asset is recognized as an investment property as and when it is probable to receive future economic benefits, and cost can be reliably measured. An investment property is initially measured at cost. Cost comprises the purchase price and attributable direct costs for a purchased investment property while land and construction costs for constructed investment property. An entity does not consider the costs for the day-to-day servicing under the carrying amount of an investment property but such costs are charged to profit or loss. If the payments to investment properties are deferred then the cash price equivalent is taken as the cost. The initial cost of investment property held under lease shall be lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount shall be shown as a liability. Here the fair value of the property is the fair value of the interest held in the leased property and not the underlying property. If a property under operating lease is accounted as investment property, then it needs to opt fair value accounting and the cost option is not available. The investment properties under construction could also be measured at fair value if fair values could be determined which before was being accounted at cost until the completion of the construction. If an entity opts fair value or cost basis for its investment property it is required to apply the same basis for the similar properties. In a property trust, you buy ‘units’ in an investment operated by a professional investment manager. Other investors also buy units in the property trust. The property trust’s money is invested in the property market. Your money usually stays in the Property Trust until it ends, when the properties are sold and the net proceeds are distributed to investors. Some property trusts allow you to withdraw early. Because property trusts invest in property, their assets are less readily ‘saleable’ or ‘liquid’ than some other investments. This could limit when and how you can withdraw from the property trust. Many property trusts do not offer withdrawal rights at all. Some property trusts invest in property development, which means there are extra construction and development risks compared with investments in established buildings. A property trust will have other expenses as well as interest and should have a reasonable buffer between earnings and interest payments. Knowing what a property trust’s real property assets are worth can help you assess its financial position.

Advantages of Property Trust in Investment Property

Investment property is any property bought with an intention of getting a return by generating profit through rental income and/or capital gains. Investment Property is always considered to be a safe and profitable. What price you pay to buy a property today can multiply in years to give you great returns. Unlike money, the value of property usually continues to rise despite any economic or political situation. Investing in property has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the property market has plenty of opportunities for making big gains, buying and owning property is a lot more complicated than investing in stocks and bonds. When starting to invest in property it’s important to be clear on your property investment strategy. Are you going for high rental returns for the short term or are you going for long term Capital Growth? If you’re thinking about investing in property for the first time, it’s important to seek professional advice. Investing in property has several benefits, including the potential to: • Generate capital growth – increase in the value of your property over time • Generate rental income and yield – annual rental income less any costs divided by the purchase price of the property • Gain potential tax advantages associated with negative gearing – with negative gearing you can deduct the costs of owning your investment property from your overall income, reducing your tax bill. A Property Trust is a private, nonprofit organization that, as all or part of its mission, actively works to conserve property by undertaking or assisting in property or conservation easement acquisition, or by its stewardship of such property. A property trust is a legal arrangement where one or more 'trustees' are made legally responsible for holding property assets. Property trusts are helpful in buying properties for investors. A properly drafted and managed property trust can confer advantages under any or all of the following: Property protection: Property Trusts can be used very effectively to protect your property assets. Tax planning: Generally speaking, property trusts can be extremely effective for tax planning purposes and a correctly structured and administered property trust will produce substantial savings in income tax, capital gains tax and inheritance tax/estate. Confidentiality: Property assets in a trust are completely confidential, it's a private matter. Gaining flexibility: The best laid plans can, in a changing world, rapidly become obsolete. A discretionary trust can, however, be structured to provide for a system of management of property that is capable of rapid change as circumstances demand. Keep purchase price secret: By using a property trust you can keep your purchase price of the property secret. Keep sale price secret: By using a property trust you can keep your sale price of the property secret. Keep change of ownership private. When you sell a property in a property trust, you can sell the beneficial interest of the trust, rather than conveying by deed. This way no one knows the property has been sold.

Role of Property Trusts in achieving capital growth

Property trusts are investments where money is invested in property. Investors buy ‘units’ in an Investment Property, which is run by a professional investment manager. A Property Trust offers all the benefits plus greater peace of mind if you own a property and wish to best protect its value for future generations. You can use different types of property trusts to achieve a variety of specific estate-planning objectives. You can use some trusts for a single estate-planning objective, while others help you achieve more than one goal. After you place property into a trust, that property is formally known as a trust property. By investing money (or capital) in the property trust, it is possible to get a regular income, usually half year, which is called distributions. You may also get a ‘capital gain’ on your original investment. If the price of the assets in the property trust has increased when they are sold, you get a capital gain. If they have decreased, you get a capital loss. Capital growth is the increase in value of your property portfolio over time and should be considered alongside the property's yield. While there is no guarantee your property will gain in value over any given period, and capital growth largely depends on where and what you buy, historically real estate experiences steady growth over the long term. Although rental yield and tax benefits are significant financial advantages of Property Trust, capital growth is generally the most significant financial reward. Different types of property will experience different levels of capital growth and it is not uncommon for investors who buy 'off the plan' to experience an almost immediate increase in capital growth between paying their deposit and completion of the property. It is a perfect time to invest in property trusts, enjoy high benefits now and experience strong Capital Growth in the future.