SMSF and IP investment

[Deckain]

Hi All

Thanks for the interesting tread about SMSF and IP’s

My questions and scenario’s below for anyone that can assist.

Myself and partner have around 4 super funds, I know not ideal but I have been lazy but reaching an age where I starting to look more forward.

We would have over 100k in these funds combined, I would like to look at purchasing an IP for around 200k which is really a holiday let apartment on the Sunshine Coast (Qld)

Is it possible to –

Use this money as part payment and use what I have in my redraw facility to pay the rest?
Diversify by using the funds in my accounts that we are not contributing to which is the bulk of the funds?
Continue to use my existing to fund to contribute and have a SMSF?

The return on the unit is not great after mgt fee’s from the onsite mgrs. At around 5kpa. But this would be a long term proposition (20yrs) so hopefully this will outperform the current super we now have. I believe if we don’t sell until retirement then we don’t have to pay CGT according to what I have read. The current return on the property is 16kpa but as mentioned this is eroded by fee’s etc so far from positive cash flow. I will see an accountant re this but wanted to get feedback from people that have actually done and experienced this.

Any advice would be appreciate and I am sure there would be a lot of questions.

Cheers

 

[Aaron_C]

You can put down your deposit and borrow the rest from the lender, assuming that the security is acceptable. It may not be if it is a serviced apartment, in which case you'd need to come up with all of it in cash.

 

[Deckain]

Thanks Aaron

It is not really a serviced apartment but a unit that is managed by the onsite manager eg takes booking, cleans after guest etc.

How could I use my SMSF in this equation if at all?

Cheers

Chris

 

[Shahin_Afarin]

Security will be unacceptable for SMSF. I don't think there would be any lender that would accept that.

Why would you be considering this if the yield is not good? The only attractive quality of serviced units is the yield.

 

[Deckain]

Thanks mate, I would not require a lender as with the Super and other funds I would be able to purchase this outright, saying that I may be heading down the wrong path. I am foreign to this whole IP and SMSF so I appreciate your feedback and I may be just in the land of make believe.

I am not so much concerned about the yield as long it is not in the negative, it is more about moving my super from something that isnt delivering returns now to something that will at least hold its value and appreciate over time. This is a long term view and we could also use it when not being let to holidaymakers (probably in the low season so I can maximise the return).

I have looked at the history of the complex and it has looked bleak over the last 6 years with capital gains and most are selling below what they were purchased for post 2006 so I think it may a good time to buy as I feel the market in this area has stagnated at worst.

Kind of an investment in lifestyle as well as for the future.

Cheers

 

[Shahin_Afarin]

Ok then that will not be an issue. It then comes down to 'is this a good property' which obviously I can't comment without further info. Just we wary though about putting all your eggs in the one basket (sorry for the cliche). Im not a planner but maybe investing in cash may give you stable if not better returns?

 

[tobe]

I dont think you can use a property that is owned by your super fund.

''This is a long term view and we could also use it when not being let to holidaymakers (probably in the low season so I can maximise the return).''

 

[Deckain]

Ok then that will not be an issue. It then comes down to 'is this a good property' which obviously I can't comment without further info. Just we wary though about putting all your eggs in the one basket (sorry for the cliche). Im not a planner but maybe investing in cash may give you stable if not better returns?

Thanks and agreed, thats why I would want to diversify somewhat with the continuation of the current super I am using which has some of my IP and Death insurance included. I would use the funds in the other super funds I have to invest in the IP

 

[Deckain]

Thanks Tobe - I beleive you are correct and it should be at arms length. However as it would be our property and being let per'se then I should be able to have a friend stay there and we could book another room using their money etc. I am sure we could work a way around it if you see where I am heading. It wouldn't be our POR at any stage.

 

[jingo]

Thanks Tobe - I beleive you are correct and it should be at arms length. However as it would be our property and being let per'se then I should be able to have a friend stay there and we could book another room using their money etc. I am sure we could work a way around it if you see where I am heading. It wouldn't be our POR at any stage.

I think you would be in breach of the super rules here.

On another note, would $100,000 be enough to purchase a prop through a SMSF? I think you need to allow a certain amount of cash to be set aside for running expenses etc.

Plus, allow for annual auditing fees of your fund. Could end up costing you more than it returns??

 

[Rolf Latham]

I think you would be in breach of the super rules here.

On another note, would $100,000 be enough to purchase a prop through a SMSF? I think you need to allow a certain amount of cash to be set aside for running expenses etc.

Plus, allow for annual auditing fees of your fund. Could end up costing you more than it returns??

some lenders have min remnant left overs, others will allow you to pay running costs out of cash flow

ta
rolf

 

[Terry_w]

Yes, could be done several different ways:

1. SMSF with deposit and borrow the rest (subject to security deposit being ok).
2. SMSF and you as joint tenants (no borrowings).
3. Unit trust with you and SMSF as separate unit holders, no borrowings.
4. as above but separate SMSFs.

The unit trust way is good because you could let the SMSF buy units over time as the fund builds up more cash, so eventually the SMSF will own whole property by owning all units in the trust.

You could never stay in the property though as that would be breaching the SIS Act and regulations.

Also consider as trustee whether it would be prudent to put all your eggs in the one basket.

 

[Terry_w]

Also, there is a new 'product' out which allows a person to indirectly use their super as a deposit on a home loan. 95% LVR with no LMI available.Title held in individual names/company/ trustee ok.

 

[Deckain]

Thanks, good to see it is achievable with many option available. Now to find the right option and see if it is viable. In regards to running costs, what are you refering to?

Running costs of the unit which is all managed or for the fund? If it is the fund what are the running costs involved. I have read previously it can be around 3-4k to set up with annual costs for managing and auditing etc.

Cheers

 

[CouchPotato]

Also, there is a new 'product' out which allows a person to indirectly use their super as a deposit on a home loan. 95% LVR with no LMI available.Title held in individual names/company/ trustee ok.

Hi Terry

What product is that and how do we get more information on that ?

Thank you

 

[Rolf Latham]

Hi Terry

What product is that and how do we get more information on that ?

Thank you

HI CP

Id suggest you PM Terry


ta

rolf

 

[CouchPotato]

HI CP

Id suggest you PM Terry


ta

rolf

Thanks...anyone else know about the product ?