Why buy Negatively Geared Properties? I think the calculations are wrong

[JIT]

For me personally, I've decided NOT to use a super fund. I still haven't seen anything that will allow me to access superfund income before I'm 55, and my plan is to live off investment income way before I'm 55.

Alex, not quite what you're after but...

If you have a LOC against an IP outside super and you do a related party lend to your SMSF eg. for 100k, which then invests the funds in say shares, and that investment grows to 200k over time, the SMSF could sell those shares whenever and you can get your intial 100k outlay back whenever eg. before the preservation age.

Alternatively, if you were to make a geared non-deductible SMSF contribution eg. 150k in a year, the interest here is non-deductible and you can't access that 150k till at least 55.

So with super gearing strategies you can effectivey access
money transferred into super at anytime before the preservation age!

What do you think?

Given the ability to do related party lends, with no $ limit on this, you wouldn't bother with geared non-deductible contributions, and would be best making these with cash if needed.

 

[alexlee]

If you have a LOC against an IP outside super and you do a related party lend to your SMSF eg. for 100k, which then invests the funds in say shares, and that investment grows to 200k over time, the SMSF could sell those shares whenever and you can get your intial 100k outlay back whenever eg. before the preservation age.

Alternatively, if you were to make a geared non-deductible SMSF contribution eg. 150k in a year, the interest here is non-deductible and you can't access that 150k till at least 55.

So with super gearing strategies you can effectivey access
money transferred into super at anytime before the preservation age!

What do you think?

If that works as you say, that allows me to take my initial contribution out before 55. Which is fine, but obviously considering my age it's the gains I'm more interested in. My first IP (10 years ago) had a cash contribution of 25k and how has appreciation of 200k+. Being able to just get my original contribution out doesn't mean much. Also I wouldn't be able to access the income from those assets.

Given I'm still more than 20 years away from 55, the relatively difficultly in refinancing property within super is in issue. LOE, for example, would not be possible in a superfund if I'm accessing appreciation. Nor would refinancing and on-lending to a family trust to buy shares and distribute dividends to children and a spouse who isn't working.

While that 'recycling' method using parents is one option, that might not work for anyone. I certainly wouldn't want to have that level of financial involvement with my parents.

These are all great points that should be debated. But they should be debated BEFORE people choose to use super as their main vehicle. Personally, none of it convinces me to use a superfund because I want more flexibility than a superfund allows. By starting early, one can accumulate enough to live primarily off investment income without having to sell well before age 55. With full control over when to sell, I can always match it with other strategies (prepay interest, buy another property with a lot of depreciation, etc) to reduce CGT.

As I said, I have no doubt super can be a great vehicle for certain people under certain circumstances. What I disagree with is to approach this with the assumption that super is the vehicle of choice. Which is where that whole 'your property actually costs you $x in pre-tax income' comes from: it assumes the alternative is that you put it all in super as a deduction. But my tax losses are already more than $25k a year, though with positive cashflow due to depreciation, so it's not an apples to apples comparison. But why let reality get in the way of a good pitch?

People have to take a step back and ask 'is a superfund appropriate for me?' and not 'what can I do in a super fund AFTER I've put my money in?'

Your 'LOC on an outside property' strategy assumes you already have property outside super, obviously. My read of the tone of this thread is that everything should be done in super to start with. Which I think needs to be questioned.

There may be advantages for some people to transfer money into super AFTER accumulating assets outside it, especially after a certain age. If you're starting young (as I did) I would argue with a higher ability to gear, one can accumulate more outside of super, and the effect of 20 years compounding all the greater.

For me, at my age, paying less taxes isn't the most important goal: it's to have more assets, even if the income produced is taxable. For me there's a difference of a few decades of growth and more accumulation. On a few million dollars in extra gross assets because I can gear more if it's supported by my salary (both serviceability and tax deductions). For people over 50 who don't plan on accumulating much more, the situation is totally different.

I'm not even mentioning how the rules of super are still being developed and subject to government whims. While they can also change the rules regarding negative gearing, there are more entrenched interests affecting this, not to mention the big one: voters would destroy any political party that brought house prices down. On the other hand, if the government changed the super rules that mostly affect younger people, there wouldn't be much backlash, especially if they preserve benefits to seniors as a result.
Alex

 

[alexlee]

Alex, not quite what you're after but...

Exactly. I'm not after a way to wrangle some money out of my super fund. I have a very low 5 figure balance in my super fund, and I intend to keep it that way. I want full access to all of my assets well before I'm 55.

I'm not aiming to discuss the intricacies of super strategies. I want people to first ask 'is a super fund the best vehicle for me' before they decide to put money in.
Alex

 

[JIT]

If that works as you say, that allows me to take my initial contribution out before 55. Which is fine, but obviously considering my age it's the gains I'm more interested in. My first IP (10 years ago) had a cash contribution of 25k and how has appreciation of 200k+. Being able to just get my original contribution out doesn't mean much. Also I wouldn't be able to access the income from those assets.

Exactly right.

Given I'm still more than 20 years away from 55, the relatively difficultly in refinancing property within super is in issue. LOE, for example, would not be possible in a superfund if I'm accessing appreciation. Nor would refinancing and on-lending to a family trust to buy shares and distribute dividends to children and a spouse who isn't working.

Precisely.

I prefer the re-fi of debt in a high income earner's name and on-lending to a potentially lower tax-rate structure outside super like a DT, and with other beneficiaries including a company of course.

While that 'recycling' method using parents is one option, that might not work for anyone. I certainly wouldn't want to have that level of financial involvement with my parents.

Me neither, but I'm keeping an open mind about this, even if it's just a way of ''tax-effectively'' helping out my parents in some way for their own retirement.

There are more opportunities to do this for business owners who can potentially make geared (or ungeared) deductible contributions on behalf of family members under certain circumstances.

But there's a few nitty gritties on this to understand and check with your accountant first.

Personally, none of it convinces me to use a superfund because I want more flexibility than a superfund allows. By starting early, one can accumulate enough to live primarily off investment income without having to sell well before age 55. With full control over when to sell, I can always match it with other strategies (prepay interest, buy another property with a lot of depreciation, etc) to reduce CGT.

I'm not entirely convinced either, but I will likely start a SMSF in the comings months anyway for more control over whatever $ is in my industry super fund, and to try and keep abreast of the details and potential strategies that this investment vehicle has to offer, for me and my parents.

When I start my service business I am strongly considering making geared 25k pa deductible contributions (mainly as I don't think I'll notice that 25k too much out of my larger LOC balance). But again, this is not an option for salaried employees.

I think the reality though is that our tax system is just not geared towards people wanting an early retirement!

As I said, I have no doubt super can be a great vehicle for certain people under certain circumstances. What I disagree with is to approach this with the assumption that super is the vehicle of choice.

Yes, I would disagree with that too.

I think Manoj's personal experience with NG property (ie. near bankruptcy) is biasing his stance on this... with all due respect.

People have to take a step back and ask 'is a superfund appropriate for me?' and not 'what can I do in a super fund AFTER I've put my money in?'

Yes, but my gut feeling here is that there's a lot of people on this forum with a very negative attitude towards super, most concerningly I reckon in the 45+ age group, where I'd argue that your investment strategy/focus really needs to shift towards a far greater involvement of super.

Unfortunately, even though they called it ''simple super'', there's still a bit of complexity that you need to get your head around so that you can best adapt it to your own personal circumstances.

My read of the tone of this thread is that everything should be done in super to start with. Which I think needs to be questioned.

I've questioned Manoj on this via PMs and he's not swaying!

There may be advantages for some people to transfer money into super AFTER accumulating assets outside it, especially after a certain age. If you're starting young (as I did) I would argue with a higher ability to gear, one can accumulate more outside of super, and the effect of 20 years compounding all the greater.

For me, at my age, paying less taxes isn't the most important goal: it's to have more assets, even if the income produced is taxable. For me there's a difference of a few decades of growth and more accumulation. On a few million dollars in extra gross assets because I can gear more if it's supported by my salary (both serviceability and tax deductions). For people over 50 who don't plan on accumulating much more, the situation is totally different.
Alex

Exactly...

Take this hypothetical situation (a modified version of my own situation/figures!):

A 35 y/o who, over say 5-10 years, has aggressively accumulated $3M gross residential IP with $2M IP loans, so $1M equity, and the overall portfolio is slightly -ve geared.

At 90% LVR, this person could access a further 700k at 6.5% interest rate (ADD: depending on serviceability) to invest in other assets, eg. via a DT outside super, or even in a SMSF...

Eg. they could put that whole 700k in one hit into a SMSF via a related party lend, leverage it at 70% LVR, to get exposure to $2.3MM of let's say commercial IP (and specifically NOT residential property in this example), that is positively geared.

So at 35 y/o they would potentially have $3M residential IP outside super, and $2.3M commercial IP in super.

The whole thing is probably close to neutrally geared now with the positive cash flow from the commercial IP effectively ''neutralising'' the negative cash flow from the residential IP.

And now they would have $5.3M gross property assets.

Keep in mind that at 35 y/o their super balance may only be something like say ?75k (lots of variables here of course!). And if instead of sustaining a -ve gearing loss every year they had saved that money instead over the preceding years, their super balance may now have been say 150-200k.

Maybe just enough to get a 500k residential IP in super with a property warrant.

So compare this...

$5.3M gross property outside + inside super vs. 500k gross property inside super.

Compounded at say 7% pa over 10 years till 45 y/o we get... (and with no further saving or investing from this point)

$10.4M gross property vs 983k gross property... !!!

... So what's the big deal about paying some tax in this situation?!

 

[alexlee]

Me neither, but I'm keeping an open mind about this, even if it's just a way of ''tax-effectively'' helping out my parents in some way for their own retirement.

That's fine if that's what you want to do. Not everyone can, or want to. this is something that has to be thought about BEFORE people put money into super.

There are more opportunities to do this for business owners who can potentially make geared (or ungeared) deductible contributions on behalf of family members under certain circumstances.

But there's a few nitty gritties on this to understand and check with your accountant first.

Yes. The operative word being 'first'.

I'm not entirely convinced either, but I will likely start a SMSF in the comings months anyway for more control over whatever $ is in my industry super fund, and to try and keep abreast of the details and potential strategies that this investment vehicle has to offer, for me and my parents.

It's easier for me as I have nothing in super anyway.

When I start my service business I am strongly considering making geared 25k pa deductible contributions (mainly as I don't think I'll notice that 25k too much out of my larger LOC balance). But again, this is not an option for salaried employees.

My question would be, depending on the amount of assets outside of super, isn't 25k a drop in the bucket?

I think the reality though is that our tax system is just not geared towards people wanting an early retirement!

The SUPER system is not geared towards early retirement. But why should it? Super is designed to help people support their lifestyles after they stop working. My opinion is if you want to retire early, use something else. Don't use a vehicle that's designed (and will probably be tweaked in the future to be) for people with insufficient assets to live off.

Yes, I would disagree with that too.

I think Manoj's personal experience with NG property (ie. near bankruptcy) is biasing his stance on this... with all due respect.

And my personal experience is I started with a negatively geared but positive cashflow property. 10 years and a few more IPs later, I'm still negatively geared with positive cashflow.

Yes, but my gut feeling here is that there's a lot of people on this forum with a very negative attitude towards super, most concerningly I reckon in the 45+ age group, where I'd argue that your investment strategy/focus really needs to shift towards a far greater involvement of super.

Unfortunately, even though they called it ''simple super'', there's still a bit of complexity that you need to get your head around so that you can best adapt it to your own personal circumstances.

All questions to be asked BEFORE putting money into super. Not 'I've put all this money into super, now what I can do with it?' That was what got some people in trouble with trusts and so on.

I've questioned Manoj on this via PMs and he's not swaying!

Just because he's convinced doesn't mean he's right. Just because I'm convinced investing outside super is better especially for young people doesn't mean I'm right. We make our own decisions and cop the consequences. But I want people to actually be making INFORMED decisions, asking the questions BEFORE they use a certain vehicle, instead of doing it first and then asking 'how do I get around this?'

A simple question that you have to ask: if, using the ability to borrow more, I can buy just one extra IP outside of super, that might be a couple hundred thousand of extra gains over 20 years. Wouldn't that more than pay for whatever 'extra' taxes I'd have to pay by investing outside super? My opinion is that I will be able to buy many more IPs outside super.

To focus only on taxes and not on the difference in amount of assets you can accumulate, especially if you can let it grow for 20 years, is a mistake.
Alex

 

[JIT]

My question would be, depending on the amount of assets outside of super, isn't 25k a drop in the bucket?

Yes it is.

But...

I won't miss it anyway, and in a couple if years time, when my super balance increases, I can internally gear it up at 70% LVR for a RIP.

And when this RIP goes up in value after a few years, I could sell it to realise the gains and pay the 10% CGT (rather than re-financing as you would outside super). Interestingly, I know a few people here on SS who are selling property outside super and paying much higher CGT to realise gains, purely because the banks aren't allowing them to re-finance at higher LVR's to access enough of that equity growth.

Then... with a greater deposit in hand, I could leverage up again into a higher value RIP, or even a CIP, eg. own business premises.

So there's still that compounding effect of leveraging into an asset, albeit with lower gross assets overall, but within a much lower-tax structure.

If I had any money in super I would prefer it to be combined with some form of gearing as soon as possible for maximum effect.

And also Manoj's point about $3M in super generating tax free returns vs. $10M outside super is also pertinent here, age considerations aside. Ie. eventually, it's the net income that's more important rather than the gross or net asset figure. And tax plays a big part here.

I see super as potentially an extended family investment vehicle too.

And not all of us plan or want to retire early anyway. I don't think I'll ever completely retire from my JOB, but may go part-time at some point.

 

[alexlee]

So there's still a compounding effect of leveraging within a low-tax structure.

But with LOWER leverage and having the age limitation, which I'm personally not prepared to accept given my age and I'm still focused on increasing the asset base.

And also Manoj's point about $3M in super generating tax free returns bs. $10M outside super is also pertinent here, age considerations aside.

I know which I would rather have. The age consideration is important, because if I don't plan on waiting until I'm 55.....

I see it as potentially an extended family investment vehicle too.

Fair enough. But again, this won't apply to everyone.

And not all of us plan or want to retire early anyway.I don't think I'll ever completely retire from my JOB, but may go part-time at some point.

But some of us do and want to. I want the flexibility of having the choice. I don't believe super gives me that choice in my circumstances.

There is no right and wrong to this. Super is an appropriate vehicle for some, and not for others. I just want people to ask the right questions before they jump into it.
Alex

 

[JIT]

But with LOWER leverage

But not necessarily that much lower for CIP.

The LVR's are almost the same for RIPs or CIPs for super property warrants I believe.

My plan is to have my SMSF predominantly consisting of direct and indirect commercial property.

 

[JIT]

Also in case things really go to cactus and you're under real financial hardship it doesn't hurt to have some $ locked away in super.

 

[alexlee]

Also in case things really go to cactus and you're under real financial hardship it doesn't hurt to have some $ locked away in super.

I could put money into a family trust and get the same result. I can borrow from an IP, on lend to a family trust and let the family trust invest in non-risk stuff (non risk in the sense of no chance of getting sued, such as just buying shares and bonds). One side-effect is that I get to decrease my super contribution further by packaging the interest deduction on the trust loan, even though I'm getting the same amount of interest from the trust as income. So what I would have had to put into super can be redirected into a family trust instead, which is far more flexible.

I can distribute net income to kids (3k each) and spouse (not working) and pay very little tax. The trust assets would be protected from anything that happens to me personally, but would be accessible without age limits.
Alex

 

[JIT]

Alex,

Another way to effectively access super before 55 is called spousal transfer of super contributions.

Eg. A wife can transfer 85% of their annual super contributions to her husband (or vice versa). This is 100% of their contributions - 15% contributions tax.

If the wife is 50 and the husband turns 55, the younger partner can in effect access super by virtue of her older partner reaching the preservation age first!

If there's a bigger age difference it works even better for the younger partner!

 

[alexlee]

If the wife is 50 and the husband turns 55, the younger partner can in effect access super by virtue of her older partner reaching the preservation age first!

If there's a bigger age difference it works even better for the younger partner!

Then it's just a variation on the 'combine super with your parents' strategy: you need an older person in the fund. It won't work for me, since the wife and I are the same age.

All of this assumes I have money in super. What if I don't? My question is, if I don't have anything in super and significant assets outside super, is it worth putting money into super? My opinion: no for me, mainly because of my age. If I was older, possibly, but I'd still have a lot of questions.

If I'm a young person who doesn't have anything in super AND have few assets outside of super, should I accumulate inside or outside of super? My opinion, outside. Lower ability to gear, unability to negatively gear and the age limits have huge impacts on someone with a few decades of investing ahead of them.

BTW, what's your opinion on my strategy of putting money into a family trust to protect assets? How does it compare instead of using super?
Alex

 

[JIT]

My answer for a younger person at present would be to invest in both, but with a strong overall bias towards outside of super investing initially.

With any super contributions made being only up to the maximum deductible amounts and preferably geared if possible.

Having said that I still have some reservations about the cost and teething issues apparent with property warrants, so it's not something I would rush into right now.

BTW, what's your opinion on my strategy of putting money into a family trust to protect assets? How does it compare instead of using super?

That makes sense and with more flexibilty than super I would think.

 

[geoffw]

Alex,

Another way to effectively access super before 55 is called spousal transfer of super contributions.

Alex would have to married somebody probably 30 years older than him for this to work (don't know how many, I really don't know his age). This may not have fitted his individual circumstance. Especially if he was already married

Edit: He's already answered this. Sorry.

 

[joanmc]

I think this is an interesting strategy but I can't see how it helps you retire earlier. My preservation age is 60 and hubby's is 58. We retired a year ago at 40 and 45. I still have 20 years before I can access that money, even if I put it in his super I still have to wait 13 years.

Manoj's post seemed to me to imply that anyone investing outside of super was a moron but if I was investing only in super using his plan would I be retired now?

 

[JIT]

I think this is an interesting strategy but I can't see how it helps you retire earlier. My preservation age is 60 and hubby's is 58. We retired a year ago at 40 and 45. I still have 20 years before I can access that money, even if I put it in his super I still have to wait 13 years.

Manoj's post seemed to me to imply that anyone investing outside of super was a moron but if I was investing only in super using his plan would I be retired now?

joanmc, how come your preservation ages are 60 and 58?

I thought they would be 55 for all people?

Thanks for the clarification.

 

[manoj]

Willair

There is no need to read books – once you know how to buy positively geared property in super form day – first such a book does not exist YET!

My strategy is simple – purchase IP in super and change zoning and make it commercial – once you have done that – the property returns are something like 10% of cost – since your purchase price was residential and rental is commercial – since you are borrowing only 70% then it is possible that on loan the rental return is close to 15% - so serviceability is not a question for the next property.


Alexlee

There is no situation when buying outside of super will give you a better result.

Lets go back to fundamentals – like you say – why do we invest … simple that is, when we stop earning active income we are able to live on passive income – so today we want to plan for tomorrow ….

The idea should be when our tomorrow’s income is as good as today’s active income – there is no need to work – for example – our life style says that we need $100K cash every year – once our passive income reaches that level – there is no need to go to work – We all know to get that $100K in cash outside of super we will need $171K income or there about…. And if rental income from residential is about 4% we are talking about fully paid property of over $4M fully paid!

Now I do not know if this is a big ask for a 30 year old or a 40 year old – but can be achieved by the time we reach 50 or 55 … by investing in property – further to retire debt we need to sell some properties – when that happens – more of our wealth is used to pay off CGT …..

Hence to achieve replacement of active income with passive income is not easy out side of super.

Further, after reading this post, you are not to see your dentist – the reason is simple – there is no NEED – the same way – there is no need to collect $4M outside of super till the age of 55 – if we can collect only $1M in super and get a 10% return – that will give us the same result – that is $100K after tax ….

I have noticed that some want to retire at the age of 40 with $100K coming from passive income / rental income – quite frankly to collect $4M of equity by that age is quite tough – I have not seen many with about 22 years of exposure – I have seen a few – where the 5 acre property was rezoned – but nothing run of the mill investing can produce that result…

So investing in super is easier, and you still reach there – with lower risk. And you must start contributing early and not late – so super fund gearing is for the young ones and not older investors.

As you have mentioned – you do not understand super – this is because your accountant has not explained it you – you need to go to one – who understands it better …

I have many people who at the age of 30 and 40 claim that $100K is not enough – to those I just have only one thing to say – when you get to the age of 50+ the need for money reduces – need for money is higher when we are younger – at age 30 – 50 and do not ruin it by NG – I have seen many couples where the wife is delaying childbirth due to the fear of taking time off – which cannot be afforded to pre-set NG plans. Today is to be lived first – worrying too much about a better tomorrow can get you in all sought of problems… like divorce, stress, etc



NEK

This strategy works only when you have enough equity in your own home – if not then you will have get your own home revalue every – 5 years or so – since I am living this strategy – I suggest you do your sums to your personal situation and see it works for you…

The idea is not paying the home loan – but pumping your super with salary sacrifice and they Super Gearing (SG)


JINGO

What you are suggesting is called “Internal Lender” where you lend the money to your SMSF – you can charge a bit more than what you pay to the bank as your loan could be at 6% - where as the banks lend money to SMSF at 7% -so you can charge 7% to your SMSF.

Primarily you should be using your own Super balance and then borrow the remainder for 25 years from a bank and let the income pay off the interest and collect more contributions and do it all over again – if you maximise contributions and if husband and wife work – every three years you should be able to purchase property in your SMSF with $150K of contributions = say a property worth $450K – if you start now –say if you are 30 – by 45 you should have 5 properties – then you keep contributing maximum and then instead of buying more – simply get rid of the loans with contributions and rental income – my figures say that by age 55 these properties will be all paid up

The net result will be that these properties due to inflation will be worth about $5K due to inflation or cost price $2.5M till you are age 55 (at that age the 1st property purchased would be when you are 30 years old – 25 years back – I am assuming doubling in 18 years for all properties).

If they are properties which give you 5% return – on cost price they will give you 10% return – that will give you about $250K in tax free income – net present value about $98K tax free – today $ value at 2.5% cumulative inflation rate.

AlexLee

My read of the tone of this thread is that everything should be done in super to start with. Which I think needs to be questioned.

I think with your $25K of NG is not going to get to your retirement at the age of 40 which you aspire. You will need a much larger portfolio and a lot a luck for that portfolio to grow and a lot of income each year to support each years loss.

Question: Have you ever worked out how all this “retirement at 40” going to happen and what will be the income from assets at that point of time?

If not, I suggest that is a very important step which you are missing – you have to set a goal and say to yourself – that is my target and get towards it – however merely purchasing NG “with a hope” that you will get an upswing besides the normal inflation is leaving your retirement to “chance” – which can be dangerous – when happens if the property prices stay where they are – or say go down – like Dubai or US – for 20 you have lost money each year owning them – And when comes retirement time – they are not even worth what you paid for them…. Remember you get only one go at the target!


JIT

I think Manoj's personal experience with NG property (ie. near bankruptcy) is biasing his stance on this... with all due respect.

That is not exactly what I said – after selling the first 5 – there was no problem with the debt and interest was under control due to high income – but after selling a few – I realised the Profit & loss from each of them – mind you I sold them in 2002 – 2004 – the best time to sell – and some of them will sell even lower if sold today – so had I not sold them back then …. I would have got less today – further I would have to pay 6 years of loss each year! I actually feel sorry for those who purchased them for NG purposes – I came out in front in each deal – but not after taking in to consideration of all costs such as Stamp duty on purchase / holding costs (grossed up) / agents commission / imputation income for my equity / CGT to ATO believe me all deals were at a loss which led me to believe that the structure which I was using of 50% is wrong – the ATO is hanging this carrot – but the profits just not add up ….

For those who can prove to me that they have made a profit – after considering all costs – they do have to sell the property – assume it is sold at market price – and if they can prove that they have beaten inflation – I am happy to pay for their dinner for two for $100!

If I was wrong – why in your “Mecca of NG” – not even one taker has come to claim the price

So all those of you, thinking of retiring with NG’ed properties – please wake up now - as that retirement is an illusion and will NEVER happen.

JIT

A 35 y/o who, over say 5-10 years, has aggressively accumulated $3M gross residential IP with $2M IP loans, so $1M equity, and the overall portfolio is slightly -ve geared.

The above statement is wrong – first of all the value of the $3M gross after paying agents commission and CGT is your correct equity – if you still have $2M loan and stop working today – in your words – it cannot happen as it is NG geared – and wait till interest rates go up in March 2010 – all your equity will disappear and your hope of selling them at $3M – please use new figure of $2.8M!

At best after paying CGT today – you will be left with about $400K – which is your capital + the loss which you have paid each year + the imputated income on your equity – no more…


ALEX LEE

And my personal experience is I started with a negatively geared but positive cashflow property. 10 years and a few more IPs later, I'm still negatively geared with positive cashflow.

The way you are going and the value of + cash flow – do you think you will be able to retire? Assuming that interest remain what they are – but if monetary policy change – have you factored what will happen if interest rates become 9% for the next 5 years – have you devised plan B?

We make our own decisions and cop the consequences.

I think if we take less risk – we are safer … we get only one go at this!


JIT

If the wife is 50 and the husband turns 55, the younger partner can in effect access super by virtue of her older partner reaching the preservation age first!


This is called spouse splitting – I see you learn fast


JOANMC

If you are currently not working – you can legally access your super – if you are registered for newstart allowance for longer than 6 months… please speak to your super fund about it….

members would be interested to know if you pay tax every year or not because if you don't either you have retired on very low income or have a high depreciation claim - which will have to added back once you sell the properties and will wither off over time.....

as per calculation, you and your hubby will tax every year - if those properties were in super = no tax

 

[Dazz]

There is no situation when buying outside of super will give you a better result.

...and...

I have noticed that some want to retire at the age of 40 with $100K coming from passive income / rental income – quite frankly to collect $4M of equity by that age is quite tough – I have not seen many with about 22 years of exposure – I have seen a few – where the 5 acre property was rezoned – but nothing run of the mill investing can produce that result…

If you've been advising people for 22 years and you've only seen a few, then all I can suggest is that you need to either (a) get out more, or (b) start mixing in different circles.

 

[BV]

If the wife is 50 and the husband turns 55, the younger partner can in effect access super by virtue of her older partner reaching the preservation age first!

Yes but there are restrictions

http://www.treasury.gov.au/documents/367/HTML/docshell.asp?URL=splitting-05.asp

 

[Bill.L]

Hi all,

I've just spent about an hour in this thread and wonder why so many people who are good at investment strategies are bothering..

from manoj

It took me about 15 years to understand this fact and when i started selling them - i did not make any money in any one of them – after considering all factors such as inflation, imputated income, cgt etc

My strategy is simple – purchase IP in super and change zoning and make it commercial

What i am trying to say - owning a property outside of super is not a tax effective environment

Purchase of installment warrants instead of shares

with the rule of 72 money doubles every 7 years

I am a SMSF Specialist Adviser and Auditor with about 20 odd years experience in SMSF

In fact I am not even in tax practice - i retired some years back

when you purchase outside super - it is very rare to make any money....

Those who do not like my posts, or disagree to my style of thinking, my humble request is to please challenge me, query me, but please refrain from personal remarks, please…

again...

It took me about 15 years to understand this fact and when i started selling them - i did not make any money in any one of them – after considering all factors such as inflation, imputated income, cgt etc

I sold because i was smarter and i came out in front - people used to queue up outside when I was selling.

I buy a residential property and get commercial rent... and from day one rental income has to be more than 10%

My strategy is simple – purchase IP in super and change zoning and make it commercial

Gee Manoj, there isn't a couple of little inconsistencies in what you have stated is there??

I can't believe so many smart investors are wasting their time ....

bye