Flippingfor retirees

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From: Ron Bloom


Has anybody had experience with flipping as a retiree. I can't negative gear but would like to buy at a realistic price and then on sell. Anybody got any tips for an old newcomer?
Regards
Ron

 

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Reply: 1
From: Tom Cleary


Hi Ron
There are a number of ways a retiree can flip and take advantage of the tax benefits available to self funded retirees. However you would need to set up the structure correctly due to the complexities involved e.g DIY Super fund connected to a unit trust etc
Regards
Tom

 

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Reply: 1.1
From: Ron Bloom


Thanks for the tips Tom. I currently have my super in a couple of managed funds recommended by a financial adviser. The adviser and the fund managers earned more than I did over the past 12 months. So much for advisers. I am not quite sure what you mean by a unit trust connected to a super fund. And how would that affect buying and selling a house. What really got me thinking on these lines was John Burley's "Money Secrets of The Rich" where he describes acting as a bank by buying a property and refinancing it to a third party. He then pays the property off through you at a profit to you. Have you heard of this way of investing before?

Ron

 

[Sim]

Reply: 1.1.1
From: Sim' Hampel


Sounds to me like you just described a "wrap", Ron.

There have been plenty of discussions about wrapping in the forum... do a search and you'll find plenty of information.

 

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Reply: 1.1.1.1
From: Tom Cleary


Hi Ron
I agree with Sim' Hampel that what you are looking at is basically a wrap, but with a difference. Generally with a wrap, you would purchase a property by putting down a deposit, usually 20% and borrowing the rest from a prime lender. You would then find a buyer who is unable to come up with a 20% deposit, but may be able to manage a 5% deposit (i.e. on a 200k property instead of 40k can only manage 10k)you would then add say 20% and 2% above prime lending rate over say a 5 year period. In this way you would guarantee capital appreciation of 4% per year and a return higher than your borrowing costs.
With superannuation the situation is different in that there is no margin (you cannot gear or take a charge, everything has to be paid 100% up front)
With the Australian market awash with liquidity now is probably not the best time to use this strategy. However things are tightening, at least one major lender has stopped lending in the 3000 post code area, and a lot of lenders are reticent to lend in rural areas, so cash is king. You as the bank can buy in these areas (Make sure you have a buyer to on sell to first) and then act as the bank for that buyer. Because banks are not lending you should not have too much trouble buying wholesale as there will not be too many buyers in the market.
P.S Forget about unit trusts tied to a super fund, the Government has closed that loophole, sorry
Regards
Tom

 

[WebBoard]

Flipping for retirees

Reply: 1.1.1.1.1
From: Ron Bloom


Thanks for all the good advice Tom. You've given me a good starting point and I think I'll take Sims advice and search through the forums for whatever else I can find out.
Doing the first one will be the hardest as there is always the fear that everything may go wrong. If I can carry out the first one successfully then it will encourage me to go further.