Four Reasons Why I Own Nothing

I actually got sued by about 100 people when the GFC happened, and everyone's investments across worldwide went down.

Andrew, you've said to me before, "I own nothing." Absolutely

nothing. Okay. At what point- Sue me, Adam. At that point in time, I said, "I'm never gonna own an asset again in my name," and that's, uh, reason number one why I don't own anything, is asset protection.

What do you actually mean by asset protection?

One thing I can say is that-

Now, another reason you own nothing is borrowing capacity.

Yeah.

Talk us through that.

I make sure I have loans on all my properties. They have an inheritance tax over there which is roughly half of what people own, so every time someone dies-

The government takes half

you lose half your money.

Well, I think today's conversation really does highlight something most investors don't think a lot about.

One of the benefits to me of not owning anything is-

Hi, I'm Andrew Wright, Principal of Professional Southport, and this is the Andrew Wright Property Podcast. I've built a multimillion-dollar property portfolio, delivering a seven-figure annual rental income, and led my real estate team through thousands of sale and lease transactions. In each episode, I share real deals and strategies that will help you find, fund, and operate profitable property deals.

The aim of this show is to provide education and build a community of like-minded investors who can collaborate, share insights, and help each other in each other's journeys. You can make excuses or you can make money, but you can't do both. So come and join us

Hello, and welcome back to another episode of the Andrew Wright Property Podcast. Now, today's episode is actually gonna surprise a lot of people. Andrew, you've said to me before, "I own nothing." Now, if people heard that without context, they'd probably assume you don't own any assets at all, but the reality is totally and utterly different.

But you, you do own nothing.

The only asset I hold personally is a credit card and the clothes on my back.

All right. That's it. Where do we start? How do we unpack this? How do we give this comment context? I want you to explain how we've done, uh, 35, 38 episodes of this podcast on all the things you've bought- Mm

and you own nothing.

It's funny because when I do a full doc loan, my mortgage broker gives me two lots of assets and liability statement, and every time he says, "Oh, Andrew, the bank needs you to fill in one personally and one for all your entities over here." And whenever I fill in the one personally, all I do is I put down my credit card limits and there's nothing else there, and the bank every time comes back, "Oh, surely this guy owns something.

How can we lend this guy money?" And I, I literally don't own anything. So everything is owned in corporate structures, uh, for trusts, and, uh, y- discretionary trusts, unit trusts, a hybrid trust. Um, soon I'll be purchasing a self-managed super fund, but I haven't done that yet thanks to all my share trading losses.

I don't, haven't had the capital to buy in there, but I will in the near future. So yeah, I own nothing.

Give our, our viewers or listeners a, a sense of how many structures you've got. How many companies do you have? How many trusts do you have? You probably don't know the exact number. I, I

don't know, more than 10.

Yep.

Yeah, more than 10. I, I don't know. I honestly don't. I, I set up two last week- Yep ... um, because of the changes to this, um, uh, taxation of trusts that they proposed in the budget being 30%. I'm in the process of buying properties now, and I haven't got taxation or legal advice around it. I've just made a decision myself that the best way to go is to have future acquisitions in a corporate structure because if I'm gonna pay 30% tax, I want to make sure that I can pay myself fully franked dividends with a franking credit.

And at the moment, at the time of recording, uh, there's no guarantee that a trust will be able to distribute a 30% tax credit once it's paid tax. So I'm going with a, a safer strategy of using a company which doesn't get any 50% discount for capital gains tax, which is why I haven't used them in the past.

But going forward, if I'm gonna pay 30% tax, I want to carry forward a franking credit which allows me to distribute dividends and try and, uh, get reimbursed for that tax already paid. Sure So personally, none of anything you've ever done is actually in your,

your personal name?

Oh, in the early years, like my first house and my first couple of industrial units were- But as we stand today- As we stand now, nothing.

Okay. Absolutely nothing. At what point- Sue me, Adam.

I love it, I love it. At what point did you realise that, um, you know, structure was just as important as the deal and the property itself?

Well, that's, um, a gradual thing that's progressed, but obviously when you become a financial planner, you learn a lot about taxation, about legal structures, about different entities and the rest of it.

And the most important lesson I learned was actually at the end of my financial planning career when I actually got sued by about 100 people when the GFC happened, and everyone's investments across worldwide went down, and the no-win, no-fee lawyers went to our clients and said, "Hey, well, there's an opportunity here.

We won't charge you any money. How about we go and sue your financial planner's head office for recommending that they sell all these investments?" And, you know, I'd go, and I had about 100 people suing me, and, um, it's, it's so, um, disappointing that I had great relationships and great friendships with a lot of these people, and I'd bun- bou- bounce into these people, and they say, "Oh, we're not suing you, Andrew.

We're, we're, we're suing your head office." I said, "No, no, you're suing me." Like- I know ... I'll get lumped into this. I'm the one who gave you the advice. And they weren't even told that they're suing me, they were just told by the lawyers, "Oh, we're not suing Andrew." No. "We're suing his parent company." And, um, from that, um, you know, claims there, I'm not gonna go through the numbers, but, uh, the amount of the claims initially were about $17 million that they were trying to get out of me and, and the h- parent company.

I'm not gonna go through the details of what happened there, but at that point in time I said, "I'm never gonna own an asset again in my name." And that's, uh, reason number one why I don't own anything, is asset protection.

Well, that's what I wanna go through with you now. What do you actually mean by asset protection?

I mean owning nothing

So that it can't be taken away

Can't be taken away

But explain that to our, to our listeners who maybe aren't-

Yeah, look, e- even as a financial planner, um, I am not licensed to give this sort of advice and, and give advice to the listeners. So I don't- This is not advice ... don't take advice from me.

And in all honesty, I don't even understand all the intricacy, so you should talk to your own lawyer, um, in particular when you're, when you're seeking this sort of advice. But one thing I can say is that if I don't own anything and it's all in separate corporate structures, uh, it's a lot difficult, a lot more difficult for a lawyer to attack assets held by some other structure.

And I go further than that. Not only do I not own anything, but another thing I do, which I think assists from an asset protection point of view, is I make sure I have loans on all my properties. Nearly all of them have loans. So if you think about it, if something out of your control happened to you one day and y- you say you accidentally ran over someone and your insurance didn't cover you and someone wanted to sell- sue you for $20 million because you accidentally killed someone and it wasn't your fault You, you don't wanna be a p- in a position where you lose everything.

So I make sure that all of my companies that own these assets have loans on them, because if someone approaches their lawyer to sue you, the first thing that lawyer's gonna go and do and have- is go, "Let's go and have a look and see what assets this guy's got. Let's do a search of- Yep ... assets under his own name."

And even in a company, if they find out that you control the company, they'll go, "Let's have a look at what these properties are worth." Now, if they spend 30 bucks and order a title search, every one of my properties you'll see that there's a registered mort- registered mortgage with XYZ Bank, and when that lawyer goes back to that person wanting to sue you, they might say, "Look, it's gonna cost you 50 to 100 grand to sue this guy, and, uh, case A is, oh, we've done a search and this guy owns this property outright.

It's worth $2 million. Let's go no-win, no-fee. Let's have a crack here because you've got nothing to lose." But when you've got loans on it, look, it g- case B, "Oh, look, it's gonna cost you 50 to 100 grand to sue this guy. Here's this property and this company which he controls, but there's a mortgage to the bank."

Which makes it- "

We don't know how much the loan is, and, you know, there might not mu- be that much equity in there." Ah, so they- "Do you really wanna have a crack?"

So they can't clearly see what, what amount- No ... is still owing on it, so they then can't give it a value. No. So, you know, as you, as you follow the trail, then, well, we don't know what it's actually- It

makes it

higher risk

how much equity is

in it. It makes it higher risk. Do you really wanna have a crack at someone when there might not even be much equity in there?

So has that been an asset protection strategy- Yes ... that you've deliberately used- Yes ... to make sure there is a-

Yep ...

a, uh, a mortgage on every single-

Yes, but it also aligns with my values of wanting to expand a portfolio, revaluing, drawing a- as much equity as I can out to go and fund the next property.

Borrowing more. So-

It all fits hand

in hand ... the values are aligned. It's asset- But it's,

it's another, it's another tick in the box- Yep ... that it's giving you a, a level of asset protection-

Yep ...

in, in a, in a worst case scenario.

Exactly.

Makes sense. All right. So what about estate planning then? Most people don't think about estate planning until, you know, much later in life.

Why should people think about that now, and how does, you know, you not owning anything play into that?

Let's help the au- the viewers out and the listeners out by stating the four reasons why I do it instead of l- letting them wait for three and four. So number one is asset protection.

Yep.

Two is estate planning.

Mm-hmm.

Number three is borrowing capacity. Uh, and n- and number four is tax planning. Now, we're talking that in different orders, right? Mm. So we've covered the, um, asset protection- Asset protection.

So let's talk estate planning ...

estate planning. Yeah. When I die Let's just hypothetically say I've got, uh, 50 or 100 properties

Yep

I don't want my kids to spend three years with lawyers getting probate or, or whatever they need or going through- Yep

a will and then having to sell 50 or 100 properties Paying massive amounts of capital gains tax, uh, or what have you, and three years of their life, they'll wish I never died because it'll be such a nightmare for them. Y- can you imagine that? Your, your parents die, and the next three years of your life you're sorting out- Yeah

the sale of properties to try and distribute and say, "What a nightmare." I don't want my kids to go through that. Now, I was married for 20 years to a Japanese wife, a lovely lady who we're great- I'm great friends with now. In Japan, they have an inheritance tax over there which is roughly half of what people own.

So every time someone dies-

The government takes half ...

you lose half your money. In England, my understanding is you can have about $600,000 which is inheritance tax free, and then they lose 40% of anything over 600 grand. Now, the way this government is in this country, I wouldn't be surprised if in the next 30 or 40 years some inheritance tax hits this country.

So my situation is that I own nothing, and as part of my estate planning, all I need to do is make sure that my two kids are instructed to be directors of all of my companies. And when I die, nothing needs to happen. They're- those two kids are already company directors of every company, and those properties are in the name of the company.

They're already directors. They're already signatories on all of the company bank accounts. Nothing needs to happen. Nothing changes. We don't trigger any tax. They don't have three years of nightmares dealing with lawyers trying to sort out my estate. The only thing that will need to happen is in my will it'll say that I'm gifting the shares in my companies in, in each of those trustee companies to my kids.

I've crossed it. Little bit of paperwork to transfer- Yeah ... the shares- Yeah ... but there's no triggering. How much are you leaving to your podcast producer?

We'll leave that

for now. Let's see how much value you add over the next 10 years- Okay, done ... and we might whack you

in. Done, done, done. Excellent. So very- look, that's incredibly smart.

Mm-hmm. And, um, yeah, implore anyone listening out there to do some estate planning, 'cause there's some very clever ways, um- I'm not s- ... to, to ensure- Yes ... that you can pass on your legacy, can pass on your wealth, um, and not, you know, be stung, and that's obviously a, a great way, and you've ... I mean, it would be. If you've listened to this podcast, you know how many properties Andrew owns- How many will I have in 40 years?

And, and exactly. And, um, the fact that y- you know, it's for want of a, a, a bad phrase with you dying, walk in, walk out- Yes ... um, then, uh, you know, how easy does that make it for your, for your kids? Yeah. So, um, very important.

But, but I just wanna point out that I'm, I'm not a lawyer. I'm not licensed to give this sort of advice, and it may well be for the majority of listeners that an estate planning strategy could be as simple as buying in joint names with your wife, because when you die- It automatically transfers to the surviving person- Mm

when the, when you buy a property jointly- Mm ... unless it's tenants in common. So- Yeah ... I'm not saying what I'm doing is right for everyone. What I'm saying is estate planning, if you build a large portfolio, might be a bit more complicated, and you need to seek advice for yourself.

Okay.

Mm.

Now, another reason you own nothing is borrowing capacity.

Yeah.

Talk us through that.

When you're self-employed, um, your income can be rather lumpy. You can have great years and you can have terrible l- years, and I've had years when I've run at a, at a loss in my business. And when you wanna do a full doc loan, um, if you've had a bad year, you, you just might not qualify.

There's been plenty of times due to my high level of debt where I just would not qualify for additional bank finance under a full doc loan. So one of the benefits to me of not owning anything is I can use the option of a lease doc loan where a, a bank will just look at a new structure that you set up, a special purpose entity which goes out to buy one particular property.

On a lease doc loan, if there's, um, X amount of income, it'll l- look at that entity standalone and say, "Well, look, the tenant's income is gonna be sufficient to justify lending the money for this purchase," and it saves 90% of the application headaches of a full doc loan. So by setting up a new entity each time, it, for me, it certainly helped me with my borrowing capacity.

And let me tell you, I've had lease doc loans done plenty of times when there's no way a bank would've lent me money if they relied on all my financials, where I've had a bad year-

Yep ...

but a lease doc's got me across the line because they look at this, the tenant's financial strength.

So lease docs are only available to entities rather than personal?

Ask a mortgage broker. I, I suspect personal people can get a lease doc loan as well.

Right.

But I- I don't know, Adam- Sure ... 'cause I've never done one in my own name. Yep. Talk to a broker.

Yep. And look, broker, in, in, all of this, um, brokers, financial advisors- Mm ... accountants, lawyers, you need them all. Yeah, don't rely on this- We've done a, we've done a whole, um, episode on how to build your team.

Yep. Um, and you need good ones of, um, of all of those- Absolutely ... um, certain times and especially with your estate planning, um, your borrowing capacity. And reason number four to not own anything is tax planning.

Yeah, well, we talked about how that ties into estate planning, so the first thing is, um, thinking 30 or 40 years down the track when you die.

I mean, who knows if there's gonna be inheritance taxes? But if you've got, let's just say a, a company that goes on and continues after you die, and there's no trigger to force you to sell that asset, well, you're not gonna trigger an inheritance tax if it doesn't need to sell. That's the first thing. But even on an ongoing basis, one of the benefits of not owning anything is that I have no taxable income, so- For the last 20 years, um, I have had a ta- personal tax refund- Mm

because I just distribute myself a fully franked dividend which has the 30% imputation credit. I get a tax refund every year in my own name, because I have no salary. Mm. I've never paid myself a salary, and it's very, very unusual structure. I'm not saying it's right for everyone else, and it's certainly not possible if you draw a salary from an employment situation.

But there are ways to structure your income from a tax planning point of view, and having no- nothing in my own name gives me more flexibility to do that.

Yeah.

The other area which ties into that very, very, very much so is planning around not just income tax, but land tax.

Mm.

If I owned all of the properties in my own name, I would have long exhausted the $600,000 threshold which a Queenslander is allowed to own in land before you start paying land tax.

But because I own in structures in companies and trusts in Queensland, and every state is different, every single company or trust gets a new $350,000 threshold for land tax.

And this is why you set up new entities almost, almost every time?

Yeah, and yes, I do. And the reason is, the, the land tax above that threshold of 350,000 for a corporate structure in Queensland at the moment, don't rely on me, talk to your lawyer, is 1.7% of every, uh, dollar of land that you own over 350.

So each $350,000 threshold times 1.7%, that's $5,950 a year I save on every single new company I set up to buy a property. Because if I added that extra 350 onto the existing asset base, I'd be charged 1.7% on that 350, and it gets worse. As it scales up, there's a sliding scale- Is- ... and they actually whack you more.

So at a minimum, I save $5,950 a year in land tax in Queensland on every single structure I set up to buy a new property. It is offset by perhaps a couple of thousand dollars in extra admin costs with an extra ASIC fee, extra accounting fees every year. It might be an o- extra two grand of costs on the admin side, but I'm still four grand a year better off every single time I go down that track.

With

every single one.

In Queensland.

Yep.

New South Wales, for example, a trust doesn't get those thresholds and you start paying land tax almost at the start, but a company does get the land tax threshold. So don't listen to what I'm saying, 'cause even I need to get advice. Yep. Like, I'm looking to buy in New South Wales now, and it's completely different.

Yep. So I'm by no means an expert. In South Australia, uh, under $2 million for commercial property, there is no land tax. E- every state- Everywhere is different ... is different, so you really, really need to get advice. Yeah.

Now look, you've mentioned in previous podcasts that you haven't bought anything with a, a self-managed super fund- Mm

but you've also had on guests who've s- talked specifically- Mm ... about that strategy. Mm. Why haven't you, and are you planning to?

Uh, the reason I haven't is I gambled all my money away in my self-managed super fund in 2008 in the GFC with share trading, and I still have $600,000 of carried forward losses there.

And if I hadn't have gambled my money in the stock market thinking I was God's gift to share trading, uh, I would've bought property in there now. But it's really, really close to happening. Um, we'll get Grant Abbott on, a self-managed superannuation fund specialist, hopefully in the next couple of, uh, episodes.

Mm-hmm. And he will educate the viewers on the opportunities there. But I can- Whack in some large contributions up to the next, uh, up to the last five years of, um, tax-deductible contribution limits, about 30 grand each year. I can whack in 150 grand for me, 150 for my son, who's a member of my super fund.

There's 300, and a whole heap more of, um, non-tax-deductible contributions to get that self-managed super fund balance up, sell a few shares if I need to, and then w- I will be buying property in that structure. Commercial, because they've just abolished the right to borrow for residential property- For residential

with non-recourse loans in a super fund.

Andrew, I don't think that's gonna bother y- you know a thing or two about commercial property.

Yeah, that's it.

So, excellent. All right. Um, look, any misconceptions about these, um, structures that you put together? I mean, you know, they offer so many benefits. Why doesn't everybody use them?

Well, as I mentioned before, um, it might not be appropriate for any- everyone. I mean, it may well be most accountants will recommend you buy your personal residence in your own name, because that's the only way that you can benefit from the capital gains tax-free principal place of residence.

Yep.

It may well be that most accountants will say, "Buy your first couple of residential properties or commercial properties in your own name."

In Queensland, a couple can have $600,000 each in land value before you start triggering land tax. So there's $1.2 million worth just of the land value, not the house value- Mm ... just the land value. So for many people, uh, it might be completely inappropriate to do what I've done, and that's where they should seek their own advice.

So I think the one key takeaway from today is, well, let's firstly remind viewers, this is not financial advice. Please always look at your own circumstances. This

is too serious to, to-

No, absolutely ... take advice from this. And, um- Yeah ... you know, this is, we're talking in general terms only. Yeah. And, uh, your own personal experience, this is not advice for anyone.

The key takeaway is go and get your own advice. Everyone's circumstances are different, and, um, there will be different, uh, pieces of advice depending on your circumstances and your situation. Mm. Um, and we're just talking about some things that are available out there- Mm ... um, that have obviously worked for you in your personal, um, circumstances.

But, um, I think what it really shows is that, you know, don't be scared of, of... I think a lot of people think this is all too complicated- Mm ... uh, you know, how am I even gonna... But, you know, these professionals are set up to be able to manage structures, ma- you know, have flow diagrams- Mm ... where everything is, and, you know, it can be managed.

Don't be overawed by it. Don't get overwhelmed. Um, it ca- it might be worth it in your circumstances. Get the advice, um, work through the costs, and, and work out the, the benefits.

Yeah, and there's a whole lot that I don't know, Adam, and every time I go and buy in another state, I start from scratch

You start again.

Yeah.

Yep.

I don't

know. Be willing to do your research- Yeah ... be willing to, um, to work out what, uh, what works. Look, Andrew, I think today's conversation really does highlight something most investors don't think a lot about. People spend months researching suburbs, yields, property types, but they spend very little time thinking about who should actually own the asset- Mm

and those four key pillars that you mentioned, which were, uh, tax planning-

Estate planning, asset protection, and borrowing capacity. Now, the, uh, the asset protection one is probably not gonna be as important for people that are in an employment situation. But for those people that are self-employed- Self-employed

the asset protection one gets a bit more important.

Absolutely. Look, I hope, um, today's episode does encourage people to ask those questions before they sign a contract and not afterwards. So do go and see your advisor, and if you don't have any, get some. So Andrew, thanks again. Great, uh, great advice. And, um, if you caught our last episode, um, last week, possibly the most exciting episode we've ever done.

If you haven't heard it, go back and have a listen because in just a few episodes' time, we're gonna be updating you on that.

You're talking about the, the lease purchase contract?

The lease purchase contract. Mm. Okay. Okay. And I know things have happened even since we- we've talked about this, so, uh, but we're not giving anything away yet.

Yeah. No, no spoilers, all right? But, uh, stay tuned. It's coming. Thanks, Andrew. Thanks, Adam.

Thanks for listening to The Andrew Wright Property Podcast. This is all about building a community of like-minded investors, who can share real-life stories, experiences, and collaborate with a view to helping each other.

Join us. Get in touch through the link in the show notes. I look forward to you joining me on the next episode.