SMSF 100k; purchase property or no?

2k for the set up and at least that amount to get back in told.. plus a little bit more for interest lost while being out of the industry super fund.. my real accountant says over 5k.

 

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Thanks for the input guys. I think I answered everyone. I was already close to making my decision to roll back when I posted the first comment and am even more certain now. It’s a bit of a mess but I feel like I’m definitely minimising most of the damage by not going any further. So that’s something I’m thankful for.

 

Yeh I lost those insurances when I left TWU. I bought private income protection at 3k pa afterwards. What’s my best course of action in regard to insurance (after the private insurance expires) in your opinion?

 

So your total Super funds would be $400K, leaving liquidity in SMSF of 10% less $40K, means you would have now only $360K to invest plus say additional 4-5% cost to fund the IP, So assume 4% of $360 IP leaves $345,600 to invest.
The interest rate is higher in SMSF, so at least 6-7%, what IP and where would you buy , generating what rent per week? You need to plan it, put it on paper, see if your contributions will de deposited monthly, whether your IP's Capital Growth is in line with your expectations, what rent and expenses (assuming 30% or 1% of gross rent) can be sustained.
IMHO, IP for $340K or so would not be a worthwhile investment as my strategy is more for CG rather than CF.
Hopefully this makes a bit of more sense?
If you can add say $50K each year into SMSF (via CC or NCC) and grow it to slightly bigger amount then perhaps yes...couple of years time. At this stage you are undertaking a huge risk, for me personally...I need to sleep well at night, that's all!
By the way I walk the talk I have over 8 IP in our SMSF, with us both as members and well beyond $1.6M each yet still in accumulation phases, not to boast, but to assure you that I have some experience....
Some IPs are bought for cash, some with external bank finance, some with finance from us personally what is know as LRBAs BUT....BIG BUT.....you need to make little steps before making big leaps, right? I wish you all the best just keep growing your amount if you can.
Also I grew my portfolio of IPs outside first, then did it via SMSF, so had experience investing already. I hope you have experience investing into RE outside too?

 

Gday and thanks for your detailed response. The total purchase amount allowable would have been a little south of 300k. This would have left the minimum amount permissible in my SMSF. I agree with your assessment and will roll back to TWU Super for around 5 years. I had planned to Salary Sacrifice up to the 25k per year to build it up, where do you get the 50k figure from? Or is that x2 because you’re in partnership in your SMSF? I do have some RE experience via conventional lending, I have 4 IP’s and my home/apartment in Brisbane. But I knew little about Super funds when I had the SMSF started up.. looks like I will have plenty of time to learn more about them now though

 

Since I’ve had a new TWU Super account created I might give them a call to see what can be done. The privately held insurance I have is very comprehensive for income protection but also pretty expensive at just over 3k with TAL.

 

You can have up to $25K concessional amount each year (via your employer + salary sacrifice or your own contribution or if you are self-employed, via employer contribution) which would be taxed at 15% in your SMSF. Also you can contribute up to $100K for non-concessional amount, but it had to be taxed outside first (as long as you limit has not reached $1.6 M, which it hasn't).
Hence if you can then don't close the SMSF, invest the money and meanwhile buil it up to at least $150K-$200K. Since you have experience then you can invest in your SMSF. You could also pull out equity from IPs outside and lend on to your SMSF yourself, via LRBAs, but there are strict safe harbor rules to follow on those (like only 70% LVR, must be P&I, paid off in 10 years, and pay the RBA interest rate stated each January). Also there is additional cost in setting up the new BARE/CUSTODIAN trust and company bare trustee so you need a team of experts to guide you to be compliant.

 

Hopefully at your age it is not stepped? Spouse is with TAL too for many years but the premium will get exponentially expensive as you approach 60 years. I hate that, each year I have been reducing SI and left out CPI too. Ask TAL to email you illustration till your required age to be insured and amounts, then you can see.
Hopefully around 60 you will have an exist strategy in mind so reducing the LVRs anyway...hence why have such high LI cover?

 

The issue is .
Why are you researching this now?


Blaming the accountant for everything is also really neglecting your responsibility.

I would not want my accountant not to answer any of my questions because he is not licensed .

Further my accountant at the time did advise me to seek personal advise and explained that he is no longer qualified to answer me. I still choose to go ahead.


For better or worse.

We use Tal for income/life insurance policies its not that expensive around $77 PER MONTHS FOR BOTH.

Take responsibility for your lack of research until after the fact.


If the share market collapsed by 15% last year you would not be chasing any one. Its only because the market did really well that you are upset you pulled out.

For us SMSF in the end was a good step I learned a huge amount and most likely would still do the same but more eyes open.

 

Don't do it. We did it in 2013 with around $90,000 in there. Wish we hadn't and it has cost us.

 

Thanks Ems, I had read your thread and was debating whether to post there or make this thread as I didn’t want to hijacked yours. I will continue reading your thread and hope things work out for you eventually. All the best

 

Great, thanks for your comment and wildly inaccurate ASSumptions.

 

Thanks for this advice, I will check the policy and investigate further. My insurance broker is part of the professional network I use so I will ask him the question too.

 

It doesn't matter what title they hold or how professional they seem, check facts, ask if they themselves hold similar policy and to show you, do they walk the talk, or just sell?

 

Yep thanks. I will be checking all facets like previously mentioned.

 

Good post.

To be advised or not? lets say the biggest smsf firm in the country - they have over 20,000 SMSFs. Not one of them has received advice. Some will win and some won't. Fact is they choose not to receive advice, and good on them. Personally I would back myself and my decisions than a balanced or growth portfolio with an industry fund and some "insurance coverage" that does not benefit me.

Like buying a property you have to do your due diligence. If you feel you were advised, you should confront your accountant and they should kindly refund a fair amount (maybe less ASIC costs). No one wants a dispute and no one wants a unhappy client. To test your accountant out, ask them whether you should wind up the smsf. This is tricky for advice to.

SMSFs and property have a target on it. The work involved is no longer worth the cost or risk to advise on it. The target is too large on us people doing the right thing instead of the spruikers.

Personally no matter your balance, an SMSF can work effectively, that is if you have a strategy. A small balance combined with contributions will enable you to build your super balance and assist your loan amount for the purchase of property.

Re insurance, if you used a broker and cancel there will be a clawback to the broker for the commission earned and they must have issued a SOA in recommending the coverage. If the accountant set up the fund sounds like an execution only form was signed.

All the best either way you choose to go.

Cheers Ivan

 

Seeking some.clariry from PC users to fund out if it is possible:-

Scenario:- need to but apartment overseas and rent won't be coming (personal reasons).

Option 1:- Pull equity from PPIr however Maxed out serviceability

Option 2:- Sell an IP. But the CGT and may not get the same amount loan as income be leas.if no rent coming for planned overseas purchase and IP area will have further CG.

Option 3- Set up an SMSF and buy overseas property outright that means no loan or ongoing payments. Set and forget with 100% potential for growth.

Any opinions about Option 3?

Option

 

Don't understand your Option 3 if rent will not be coming in? SMSF asset must be at arms length, meaning you nor family cannot reside in it and should be income producing? Quite strict rules around SMSF including investment strategy if all money just in one asset class too...
Educate yourself a bit more about SMSF.