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Have You Thought of Trading It – Up or Down?

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Have You Thought of Trading It – Up or Down?

Have you been trying to sell your business or investment property and struggling to find enough buyers to gain traction to achieve the asking price it’s worth?

I know it’s hard work trying to find a match to trade up or down, but it can help you shift a business and move on if all else fails.

There are many considerations when choosing to go down this path.  Your personal circumstances will influence your choices.  You don’t want to jump out of one challenge into another unless you are confident the outcome will be better for you.

Trading is how we bought our first home and our first business. We traded our caravan as deposit on our first home and traded a block of land as part payment when we sold our first business.

I have family members who have also traded businesses and property.  It worked for them and for us, but it isn’t always the solution.

Here are just some of the points to reflect upon, if trading looks like a good option for you:

Remain detached

Trading is one tool in the tool box.  Don’t hang all your hopes on it as the be all and end all for getting out. If your business/investment property isn’t ‘sale ready’ for cash buyers, the same problems/challenges will be present when trading.

Likewise, when considering the asset being offered to trade, evaluate it on its merits as an investment and don’t let your financial position or emotional state colour your thinking. Keep those rose coloured glasses in their case.

Be mindful of your taxation obligations

Johnson & Tennent, Director, Allan Johnson warns buyers and sellers to remember their obligations in relation to GST, Capital Gains Tax (CGT) and stamp duty.

‘A trade will have the same GST/CGT consequences as an outright sale and stamp duty will be the same. 

In other words, if you are required to pay GST/CGT or stamp duty if it was a cash purchase or sale, you will be required to pay the same amount for the equivalent cash value of the business.’

Check with your own accountant and lawyer before signing any contracts to ensure you are fully aware of your GST/CGT and stamp duty obligations.

Expect to buy and sell in the same ‘market’

Whatever is happening in the ‘cash’ market is also the case with the ‘trade’ market. Some people think when they trade that they can sell at ‘above’ market and buy the traded property at ‘below’ market value.

This happens rarely and usually only if the sellers are in dire financial straits or have other personal reasons for wanting a ‘quick’ sale or really, really want what you are selling.

Independent valuations are the best way to avoid disputes but remember too that you may be paying CGT/GST and stamp duty on the sale value of the property as listed on the contract.

Real estate agent’s commissions are payable on both properties

If there is a real estate agent or business broker involved, whether or not both properties are listed with the broker at the time negotiations commence, agents commissions will be payable on both properties.

Each seller is responsible for paying the commission on their respective properties.

In summary, trading can be a way out and can actually be fun if you enjoy the negotiation phase of ‘doing the deal’. Keep in mind all of the above, seek independent professional advice from trusted advisors and go for it.

If it’s time to move onto the next phase of your life, this may be your way forward.

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