How to structure small-scale property developments

The way you structure a small-scale development shapes not just the project in front of you, but every deal that follows. The choice between owning in your personal name, a company, or a trust carries long-term consequences for tax, liability, and borrowing power.

Flexdoc General Manager Mary Odisho says "...holding in your personal name is the most straightforward. Lenders prefer it because they can easily test serviceability against your income. Costs are lower and finance simpler. But all liability sits with you and tax outcomes are fixed..."

A company creates a clear legal shell around the project. Liability is ringfenced, ownership can be split between partners, and capital raising is easier. The trade-off is double taxation when profits are taken out and stricter lender terms, often with director guarantees.

Trusts offer flexibility in distributing income, which is useful when developing with family or business partners. They also provide asset protection, but lenders are cautious. Borrowing power can be clipped, rates pushed higher, and personal guarantees often still required.

Developing with friends or business partners

When you develop with partners, structure becomes even more critical. In a personal setup, all names go on the loan, which means each person is jointly liable. Lenders assess combined servicing, but one partner’s financial position can weaken the whole application. With companies or trusts, ownership shares can be set, but lenders will still tie back to each director or beneficiary for guarantees.

Tax also plays a key role. In NSW, capital gains tax applies differently depending on whether the asset is held personally or through a structure, and land tax thresholds change once you use trusts or companies. In some cases, you lose the personal threshold altogether. These costs can add up across multiple projects and eat into returns.

Rates and lender appetite

Lenders always attach a risk premium. Personal names are lowest risk for them. Companies and trusts attract tighter terms and higher margins. Non-bank lenders can be flexible, but at a price. The right answer depends on whether you are building to sell for a quick profit or holding to grow a long-term portfolio.

Best practice is to start with strategy, then work backwards. Map out whether you plan to sell, hold, or scale. Understand how each structure impacts servicing, tax, and liability. Balance legal advice with lender appetite.

At Flexdoc, we help self-employed developers find the mix that works today and builds capacity for tomorrow. Reach out to our team to share your scenario, start now.