Property in SMSF again, can't decide.

I was really sure I didn't want to complicate my life any more by going for an smsf to buy more property. I've got double figure ips and doing a bit of buying and selling with the aim of increasing equity. Some recent posts on property in smsf have me thinking again, could I be missing something? I'm 46, I've got around $250 in super. I'm going to be taking a career break later this year and probably won't be contributing so much to super any more as I'm not planning to go back to full time work (other than periods to get finance for purchases). If I did go ahead with this it would be for a specific type of property e.g. rising market, anticipating growth. Trying to time the market I suppose.

I'm a bit torn. No one has a crystal ball but could I be missing an opportunity to significantly increase my super fund?

 

If you have double digit IPs and know what your doing and have 250k in your super, I'd be asking the simple question...

Do you think you can beat the growth of your superannuation fund?
Assuming a property grows by inflation alone would be enough to make it worthwhile considering its CG free. You can also access any of that CG at 60(ish)

 

If you know what you're doing with property and consistently get it right , why not ?

We've don't well from buying in our SMSF in Sydney .

It just gives you access for more capital for more deposits , though you need to keep money in reserve ....

Cliff

 

@ellejay
Have just rolled over my industry super into a combined SMSF account with my wife and I have a similar balance as yourself.
We have started to look at how much we can borrow under the SMSF and must admit that the initial amount is a little less than I had hoped for with what the banks had come back with.
We will look at getting a pre approval and than start on property selection after that..

 

If you aren’t going to contribute much to super make sure you buy something that’s comfortably CF+ even when rates go up. This could restrict how much you can gear up.

 

Our contributions would be about 16-18K pa

 

I think it gets to a point its not just about growth its about strategizing using you SMSF, there are ways you can minimise tax, of course its dependent on your particular scenario.

I would recommend chatting to a savvy accouintant that can look at the big picture

 

Has the $1.6mil pension cap made sufficient difference to a strategy of building up property assets in your super fund?

Is the cap just the start of the governments scaling back of what can be extracted from your super fund in retirement.

It doesn't effect me personally as we have always seen super as some extra play money when the time comes and as this is less than 5 years away I feel pretty secure that things are not going to change that dramatically for us.

But others on this forum would need to take account of these and other potential super changes.

One that comes to mind is the recent post from @pinkboy with his commercial investment in super.

 

I'm certain that govt changes will affect super by the time I'm able to draw it, so I don't actually count it in my retirement calculations. I can't touch it for 14yrs, and even if I'm still around by then. $250k wouldn't last long anyway, even with our frugal tastes. I think I'd only be able to buy one property in smsf with the balance I have, so that's why half of me thinks it's not worth the cost and hassle whilst the other half wonders if I could double my balance with the right property. I know that no one knows the answer, just trying to make a best guess.

 

This has me a bit confused. I've got a collection of CF+ ips but I thought more than all of them, this purchase should be about potential growth?

 

Thanks, I'll revisit it with my accountant.

 

If you can access the money from your SMSF at 60 (14yrs from now) and you already have a CF+ portfolio out of tax, I don't really see the point of more CF+ property in your SMSF if you can service the debt with your standard 9% superannuation.

If you pick the right areas and property, you could potentially see two property boom cycles before the end of the 14yrs (when u turn 60). Whatever property CG you earned in that time could simply be sold down and accessed CG tax free. 1 X 500k property in today's money could potentially be worth more that 1.5 million in that period. So that's 1 million CG free. I assume also that somewhere in that 14 yrs that the property(ones) went from negative to positively geared anyway.

Take the CG money early as a retirement bonus and then live off your existing CF+ property portfolio (which I assume would be fully paid out by then).

Given u are not that far from accessing the money in super, that seems more appealing to me.

 

Thanks, that's fantastic advice. I was going to leave my super with the fund that I have but the growth has seemed poor at $250k for around 30 yrs of work. In today's money it'd run out in less than 5 years without providing anything extravagant to show. Looking at it on quite a simplistic level it does look like a couple of decent properties purchased would have grown a lot more than that. Mmm now I need some more advice on setting up an smsf for property purchase.

 

Yep, I'm buying property outside super too and not holding my breath to see much of my final super entitlement at all until it finally lands in my bank account.

 

@ellejay if you want any of the details of how we set up our SMSF, just PM me. We have been happy with who we used so far.

 

Done!

 

Can I "me too" please

 

We're probably not going to break the 1.6 mil threshold , but even if you do , the excess stays in an accumulation which is still only taxed at 15 % and effectively 10 % for capital gain ( 33% discount after holding for over one year ) so it's still a tax effective platform for high income earners .

Cliff

 

FWIW I would be a bit cautious about just buying a bog-standard, affordable resi with your super money and relying on an expectation of growth. First because your future contribution levels are expected to be sub-standard, and secondly because of extra costs of financing and structuring. But if you are an absolute gun at picking under-valued growth stock that would be a factor of course.

My personal leaning is toward business real property that you can directly influence (a la pinkboy) and second choice is to use this as a high-cost emergency fund to get that ‘special’ property that you never thought would come up when it did, and where you are personally tapped out. If it didn’t meet either category I would still be inclined to run my own SMSF but park the funds in quality f/f listed shares until such an opportunity arose. Just another fox’s view of course – not advice.

 

Lots of helpful 'not advice' on this forum. Certainly gets one thinking.