SMSF Property v Sal sacrifice

[wokka59]

Could someone please be kind enough to tell me the pros and cons of the above? A every time I see my accountant he tells me to consider buying property using my super. Currently I am salary sacrificing pre tax dollars to the 35 k limit. I have read extensively and overall am cautious about buying property with a smsf ( especially in this over inflated market).What advantages would a Smsf property give me over my current situation? I have an investment property on a large block and am also considering building 2 duplexes on the site. My wife and I have about 350k in super.

Thank you

Wokka

 

[Bunlee]

Hi Wokka

I am not up to date enough to answer the question you raised. However, the following is a link to an article that I have read and have kept it for reference.

http://www.australianunitypfs.com.a...ights - Clients/Financial Insights 151210.pdf

The article is around 5 years old and examines salary sacrifice v negative gearing into shares. I find it useful to read articles that do not necessarily relate to the specific question I may have in my mind but sometimes have the impact of expanding my thinking.

Another article that I found interesting is ;

http://www.dynamicpropertyinvestments.com.au/wp-content/uploads/2013/07/Super-Vs-Loan-Repayment.pdf

This article discusses the issue of investing into super via salary sacrifice v paying off the PPOR mortgage.

Again, not exactly relevant to your question but even though I do not salary sacrifice, have a SMSF or have a loan on my PPOR I have found the information useful to formulate my strategy for the next 5 years or so.

regards

 

[see_change]

The advantage property has in a SMSF in gearing . As an example in The last year on the basis of our pre property equity , our growth in our SMSF equity is around 50 % .

The same criteria as to which property and when to buy should be the same regardless of the vehicle the property is bought in.

We have property in our SMSF . Not buying any more as we're maxed out . Last purchase was in Brisbane last year .

The question shouldn't be salary sacrifice vs property . It should be salary sacrifice AND property . They're different issues .

Cliff

 

[baby blue eyes]

A couple of things:
1 Do you have an smsf?
2 if you don't then is your accountant drumming up business?
3 does he have someone that can sell you property?

Unless you have an smsf and it is something you are comfortable and passionate about, then don't touch it.

The industry is concerned about spruikers in this area at the moment.

If you have and smsf and are happy with your investments, then don't do something you are not comfortable with. Good on you sal sac to the limit, it will provide you with a healthier retirement.

 

[Terry_w]

It does have to be one or the other but can be both.

The main reason to buy property in super is to invest for your retirement. If property is a good investment then it may be a better investment in super because super is a low tax environment. 15% income tax and 10% CGT when the property sold (if held more than 10 months). These may be reduced to nil later on too.

You should also consider liquidity. When will the members of the fund want to start drwaing an income stream and/or a lump sum and could this be done without selling the property, or what are the consequences of selling. If it is short term the buying and selling costs may eat into any profit.

Factor in the high loan enter costs too as well as higher interest rates.

 

[Foxy Moron]

You have not provided enough details on your situation for people to respond with specific useful advice. It would seem you're in steady employment, over 49 years of age and cautious by nature. Need to know all sorts of other information such as age, remaining working years, family situation, experience with development etc to make conclusions. Interesting that your accountant has profiled you as someone that could benefit from property via smsf. I think you are right to at least start researching this area so you can make your own mind up. It appears to me though you have a project to get your teeth into outside of super with your present IP, so that's where I think you should be focussing first. For some passive investors investing via smsf can successfully turbo-charge their portfolios (such as see_change) however these people are generally running pretty hard with their non-super portfolio in the first instance, and that is not your situation as I read it.
Read, learn and keep an open mind though....maybe if the property next door to your existing IP came up for sale that could provide a chance to employ the smsf strategy, for example. In general though its possible you may achieve a better overall balance with direct property outside of super, and exposure to interest and equities within super as you likely have now.

 

[devank]

maybe if the property next door to your existing IP came up for sale that could provide a chance to employ the smsf strategy

Why?
You can't improve or add value once the property is in SMSF. It looks like I'm missing your point here.

 

[Foxy Moron]

Good point. But I'm coming from the angle that there may be some super profit to be made by parceling up neighbouring properties and then on-selling to another developer for a bigger block of units than what the small guys do themselves. There has been some interesting threads recently were people had had some massive results from buddying up with their neighbours and this is an extension of that strategy really.