Catie

[Catie61]

Would appreciate any advice as my head is spinning with the choices, and we have historically seemed to make very poor real estate decisions. I am in process of buying an investment unit in Melbourne. We are paying off our home in Brisbane but our daughter has moved to Melbourne to study at university so we would like touse my husbands super to invest ina unit for her to live in, and rent while she studies with a long term goal of my husband and I using it.

The hard part is our financial adviser is recommending off the plan unit which looks lovely but seems very small. These are in south yarra or prAhrN. Construction not started yet and completion in around 18 months. We have mx price range of 650,000.

The other option is to buy older established unit in say Toorak, armadale for around 550,000 which my daughter can use straight away.

Adviser says off the plan quality product and great location and worth the wait. I am nervous to make this decision as we are moving overseas for 2 years soon and want to feel I have done the right thing.

Ultimately y daugter just needs good transport facilities and inner city is preferrable.

Can anyone help?..

 

[DaveM]

SMSF + unit for daughter to live in = not arms length transaction = SIS law break = audit fail

 

[Shahin_Afarin]

I am concerned that your financial adviser is advising you to buy off the plan. Has he advised you what benefits are associated with the transaction and perhaps more importantly has he explained the risks associated with the purchase?

 

[Bigtone]

ask what commission the fin planner gets for the off the plan purchase.

buy the older , bigger apartment every time

 

[Propertunity]

...... we have historically seemed to make very poor real estate decisions.

....and you are about to make another one.

You are confusing 'investing' goals with the 'private' one of helping out your daughter with accommodation now, and you to use later, using a vehicle (SMSF) that is not legally allowed to do so - as DaveM has said.

The next mistake you are making is taking advice from that "Adviser" you have. You need to give him the flick quick-smart. This is NOT the time to be buying OTP (off the plan) in Melbourne in my opinion. Is he being paid a commission by the developer to sell it to you?

You daughter can rent somewhere like every other Uni student.

Invest using investment principles, not by trying to be "seen to be doing the right thing".

 

[Shahin_Afarin]

Hi Proportunity,

Whats your thoughts on houses in melbourne within a 15-20km radius and something on the train lines?

I think houses are quite cheap and the rental is good but wanted to get some feedback or actual stats.

Regards

Shahin

 

[Propertunity]

Hi Proportunity,

It's propertunity

Whats your thoughts on houses in melbourne within a 15-20km radius and something on the train lines?

I'd avoid buying anything on a train line - might get run into and smashed up

On a serious note, in the 2nd ring - 15-20kms out - near a train line - I'd say always a good starting point, before you go down to a micro level DD.

 

[Catie61]

SMSF + unit for daughter to live in = not arms length transaction = SIS law break = audit fail

Thanks Dave, we were intending to purchase 2bedrooms with view to leasing one room, and daughter would be in a share situation?.

 

[Aaron_C]

Thanks Dave, we were intending to purchase 2bedrooms with view to leasing one room, and daughter would be in a share situation?.

Would stay away from it, it's just not worth it. Never mix SMSFs with family unless it is a commercial property. As others suggested, perhaps it is best if she just pays rent to live where she wants, and then you can invest your SMSF money into other investment properties to hopefully make money that way rather than making a bad decision due to an emotional need.

 

[Catie61]

....and you are about to make another one.

You are confusing 'investing' goals with the 'private' one of helping out your daughter with accommodation now, and you to use later, using a vehicle (SMSF) that is not legally allowed to do so - as DaveM has said.

The next mistake you are making is taking advice from that "Adviser" you have. You need to give him the flick quick-smart. This is NOT the time to be buying OTP (off the plan) in Melbourne in my opinion. Is he being paid a commission by the developer to sell it to you?

You daughter can rent somewhere like every other Uni student.

Invest using investment principles, not by trying to be "seen to be doing the right thing".

Thank you, it seems amazing to me that you pay someone to give you bad advice. How do you know whn you get the right advice?

 

[Catie61]

ask what commission the fin planner gets for the off the plan purchase.

buy the older , bigger apartment every time

Thank you.

 

[savoys]

Hi Catie

Have you looked at student accommodation for rental for her?

It might be worth contacting the uni to find something close by, especially if she hasn't lived in Melbourne before.
It is a very nice thought, to want to purchase something for her to live in, but as an investment, can you afford it ?and would you have wanted to buy an investment property in Melbourne if she wasn't needing accommodation?

 

[Propertunity]

How do you know when you get the right advice?

Several ways:
1. Ask the person giving the advice, if they have ever done what they are suggesting you do.......and what were the results?
2. Ask, if I buy this property OTP, will you buy one too?
3. Ask if they are getting a commission off the developer to sell it to you.
4. Ask for references from other clients of his, who can testify to his advice being sound.
5. Ask other professionals for their critique of his advice to you.
6. Do a search on the forum here and spend a few nights reading about the horror stories experienced by 'investors' buying OTP.
7. Try to get a 'gut feeling' for what you should be doing.

 

[Scott No Mates]

I pretty much agree with the other posters - you need to look at the fundamentals of the investment not just your intentions. As for buying in the SMSF - good way of purchasing however there are restrictions as to the use so this may not be ideal when you look at the purpose you wish to use it.

By all means help your daughter out (Sth Yarra/Toorak are both quite good, St Kilda if it rings the bell etc) but not in your super fund.

 

[astr0]

On a different note make sure you comply with the Central Management and Control (CMC) test for your SMSF should all members / trustees be heading overseas for more than 2 years.

You may need to appointment a Power of Attorney (who is based in Australia) to make the key strategic decisions of the fund to comply with SIS rules and ensure the SMSF's concessional tax status is retained.

PS: my first ever post

 

[lizzie]

Have you looked at student accommodation for rental for her?

Good advice as you daughter will most likely want to end up living where all her new uni friends are living - party central.

As for SMSF - you've been told. Cannot mix SMSF and family, even if your daughter was paying market price rents.

 

[CHAOS]

Who will be paying your daughter's rent?

Then there is electricity, water and gas. Is she working while studying or are you paying for her?

If you are supporting her then adding mortgage repayments (if you have to borrow) to the mix is only increasing your expenses. I don't think this is a wise investment move.

 

[Jake Milne]

The other option is to buy older established unit in say Toorak, armadale for around 550,000 which my daughter can use straight away.

Go with this option. Both suburbs are excellent blue chip areas. You might want to go up to your $650k range if you want to buy an outstanding property in these suburbs though.

Buy an established 2 Bedroom apartment, in a quiet street such as Denbigh Road in Armadale or Lascelles Avenue in Toorak.

Make sure the unit has parking and outdoor space, is strata titled, residential zone one with no expensive outgoings such as common facilities.

If you want your daughter to rent it from you then as aforementioned do NOT use your SMSF; find the funds another way. Having a 2 bed will help you and your daughter with the holding costs as the other room can be let out to a friend/fellow student.

I'd also suggest looking at Elwood, St Kilda and Windsor/Prahran.

 

[Andrew_A]

Some good advice here. OTP can work but it's chock full of pitfalls and heavily vested interested often, best to tread very carefully.

Important to know exactly the amount of incentive the 'financial advisor' is getting paid as even though they might be technically an advisor in reality they can look awfully similar to overpaid sales people based on the fees developers shell out through these marketing channels.

Also what Propertunity said about not wearing the two hats (wanting to house your daughter and to buy an investment property) at the same time is wise advice. I regularly get this request from people looking to help their children at uni, 1) It's almost always better to make sure the investment decision is assessed objectively and 2) Uni students as tenants..

 

[TheShuffler]

Agree with what everyone has said and also want to point out that your idea of you and your husband using the unit in the future is also definitely NOT permitted if you buy through your SMSF.

Good luck with getting rid of the 'advisor' too.