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Does my strategy make sense? Advice needed

Discussion in 'General Property Chat' started by jaybean, 27th Jan, 2016.

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  1. jaybean

    jaybean Well-Known Member

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    My parents plan to retire in about 10 years. They are already semi-retired in part time jobs. I sat with them to talk through their goals, expected standard of living etc and the most glaring hole was a 300k shortfall needed to rebuild their termite ridden house. They can't sell their IP's because they will provide just enough rental income for them to live comfortably. They are currently cash flow neutral but should be generating a healthy income stream after 10 years of rental increases.

    So to make up this 300k shortfall, the plan was to buy a house in Brisbane which I'm fairly confident will have solid CG in 10 years. However they have hit their serviceability limit with the purchase of their last IP. But the one place no one ever thought of looking was their super. I had a look and surprisingly I found 135k there. So my thinking was to buy something for about 350-400k...my mortgage broker says even though they've hit their serviceability limit, the banks would likely be ok with this due to the large deposit (making it cash flow neutral or positive).

    They would then sell this down in 10 years, CGT free due to buy in via their SMSF.

    I know this plan assumes plenty of things such as Super rules remaining unchanged and it also assumes healthy growth in the Brisbane market, but of all the ideas this one seems like the most promising. What do you guys think?
     
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  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Super is the ideal vehicle for someone approaching retirement - because of the tax concessions. 10 years is a longish time frame so there may be at least one period of growth during this time.
     
  3. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    I didn't think personal serviceability would come into play regarding SMSF purchasing
     
  4. jaybean

    jaybean Well-Known Member

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    Yeah that's my thought. A 10 year plan, and we're at the beginning of the Brisbane growth cycle now so it seems to work out nicely.
     
  5. jaybean

    jaybean Well-Known Member

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    Hum interesting...very interesting...are you sure about that?
     
  6. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    No idea lol I was hoping a broker would clear it up. I just thought they would be separate entities if that makes sense.
     
  7. Kangaroo

    Kangaroo Well-Known Member

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    You may also redraw equities out from your personally owned properties and self lending to your SMSF if the current holding bank allows.
     
  8. jaybean

    jaybean Well-Known Member

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    I wanted to do this, but since they've hit their serviceability limit, they can't draw any equity.

    So if any cash is needed to shore this deal up I will probably help them out.
     
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  9. Kangaroo

    Kangaroo Well-Known Member

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    .......I like it. Top Bloke or Lady !
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    With super loans the trustee will borrow based on the income of the fund. But the lenders will want personal guarantees from the members of the fund.

    St G used to just assess on the income of the fund without regard to the income of the guarantor, and they would lend without a guarantee. However they have now changed so personal guarantees are required on all loans. so personal serviceability will affect the SMSF loans. If may still pass easier though because the SMSF has other income.