When You Should Buy Properties Using a Company? (Part II)
In our previous article under the same title, we have looked at the cons of buying property using company name. But does that mean that we shouldn’t do it and that this is totally useless?
Not necessarily so. Buying properties using company name has it’s own benefit when it comes to control and taxes. We’ll dwell into it right now.
When your property portfolio starts to grow, the amount of taxes which you are paying can sometimes be quite scary. Therefore, one of the ways in which they can reduce their tax liability is through buying properties under a company name instead.
However, this doesn’t apply to most of us average investors. It will only apply to you once you have, as mentioned above, a significant amount of properties that are giving you plenty of monies in rent. Other than that, it is just not worth to hire a company secretary and pay for all the cost it comes with setting up your own company.
It is also worth noting that if you have a company under your name, you might be able to save some cost for renovation or refurbishing expenses for the property itself.
As mentioned, buying properties through a company can come in handy when it comes to a matter of control and this is especially true when you are doing group purchase/investment.
It is just basically a nightmare if you are buying a property with 5 other people. You cannot have 5 names in your Sales and Purchase agreement to get one property, right?
Therefore, what you should do is to get a have joint ownership as directors of the company. What will happen is that you will own your share of the company, and it is the property will be purchased under the company name.
Thus, you only own the company instead of the property, and once the property is liquidated, you will get your money equivalent to your share of the property. Such a move will also allow you to avoid any issues should one of the directors pass away, as again you will only get your money corresponding to your share in the property.
Most of you expats who want to live in Malaysia know that you are only allowed to purchase properties that are more than RM 1,000,000 in KL and RM 2,000,000 in Selangor.
However, if you are the director of a Sdn. Bhd. company, you will be able to purchase a property that is below the cap because the property is considered a Malaysian entity that has been registered in Malaysia. However, the majority shareholder of that company has to be Malaysian too.
You’ll be able to gain access to cheaper properties, but this does require your other Malaysian directors to be keen to take on the loan and are also capable to take on the loan based on their own DSR.
So there you have it, the pros and cons of purchasing a property in Malaysia using company name instead. Overall it is only particularly useful if you are big enough, or for matter of control over the property.