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SMSF and overseas property

Discussion in 'Accounting & Tax' started by JohnPropChat, 21st Mar, 2016.

  1. JohnPropChat

    JohnPropChat Well-Known Member

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    Anyone doing this? Either outright or through LRBA (personal lending to SMSF)?
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Doing what ?
     
  3. Redwood

    Redwood Well-Known Member

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    If you mean investing in property overseas? yes, there are thousands of people investing in the US primarily and in other countries. We have detailed information on the RISKS and benefits of investing overseas, and I encourage you to read it before you do anything. We have a heap of inquiries into the US and now I must say I am finding it quite troublesome. I am happy to help the punter who invests in the states by visiting there and building a team, however where a promoter is involved, I caution the investor to seek a second opinion.

    There are a heap of considerations involved and its not cheap, if you are investing using cash, its easier, if you are financing, it is not easy. Once more check out the site, not for self promotion more information.

    As you mention LRBA - you can finance property overseas using a foreign lender, this became popular over the last few years.

    Seek advice.

    Cheers Ivan
     
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  4. JohnPropChat

    JohnPropChat Well-Known Member

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    Sorry, should have put the full question.

    Buying overseas property through SMSF either with cash or LRBA(me lending to SMSF from offset to buy as overseas mortgages are quite tricky).
     
  5. Gurtofen

    Gurtofen Well-Known Member

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    @Redwood You and I have different views on a certain US REIT which is fine...we will just have to agree to disagree on that one.

    However, I agree with the view that it is concerning that the amount of people looking to setup SMSF and/or invest in the US directly, is growing rapidly. I have had work colleagues invest in the US, buying property directly through Australian contacts and they got badly burnt. One colleague was so pumped with the results he was 'achieving' that I looked into it myself. I was heavily invested in the stock market at the time so wasn't overly interested but he was openly promoting the returns he was making which made me take notice. This was back in 2009/2010 and unfortunately it all fell apart and resulted in significant losses. I thought it was high risk at the time and sounded too good to be true so didn't give it a second look. The results were not good....

    Fast forward to 2013/14 and a close friend recommended the particular US REIT and suggested I have a look at it myself. Once again, I was skeptical of the US market and looked into it as the results once again seemed too good to be true and high risk......albeit commercial vs residential.....obviously I am still of that view. I could very well be wrong though.

    What concerns me though is that there appears to very little evidence that suggests anyone who has invested heavily in the US property market has been able to successfully bring that money home and 'realise' any real wealth from those investments. Currency movements are extremely volatile and difficult to capitalise on. Obviously if they are investing using a SMSF the goal is long term but my personal view is that the US economy, let alone the US property market is extremely fragile. It appears that there is a huge ground swell of spruiking the US property market and when that happens...the sheep will follow.

    I just think using your Super to invest in the US is extremely high risk and I hope that many Aussies don't continue to go down that path. Then again, good luck if they get it right.
     
  6. Redwood

    Redwood Well-Known Member

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    Gurtofen -

    Thanks for the post and especially the mention.

    Have you used your super to invest in the US? Please share your experience? you keep on mentioning people coming to you - have you done it yourself?

    I have a heap of clients that have invested in the US and as I said, the smart guys and gals that invested alone, by travelling and doing their DD, done well, those relying on crooks, did not. I have made money there in different ways, through careful DD and investment knowledge.

    Lets not derail this thread too please. If you opinion is that its not good that is fine, however with the right strategy it can work for sure. I agree good luck if they get it right but these days i'm careful about who we assist in investing overseas and clearly articulate the risks involved. Its not just the US its other jurisdictions too.

    All the best Gurtofen

    Cheers Ivan
     
  7. Gurtofen

    Gurtofen Well-Known Member

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    Redwood,

    Good to converse once again.

    I think that must be rhetorical but......no, I am unable to use a SMSF and have no need for a second fund. I have a majority non-funded super fund :). Relatively impervious to market forces which is very fortunate.

    Have the majority of your clients that have invested in the US bought their money home or are most of them still invested in the US? Is their general view that the US property will continue to provide good CG and yields over the long term and therefore provide better returns than Australian property?

    There is money to be made everywhere with proper DD and knowledge and I am not against investing in any asset class, anywhere.....in fact, you don't get anywhere without taking some calculated risk. Just seems to be a huge ground swell of support for US property using SMSF which has me baffled with such an important investment....especially considering risk vs reward. Using spare capital I could understand.
     
  8. Redwood

    Redwood Well-Known Member

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    There are a number of laws that need to be complied with when investing in the US - and a significant amount are non-compliant. One is that you must have a bank account with an Australian Approved Deposit Taking Institution ("ADI") which is here Pages - List of Authorised Deposit-taking Institutions

    As you will see, many bank of not on there. Many people unknowingly opened with Wells Fargo - which is not on the list, if they did and they have more than 5% of their balance of their fund in that bank account they are non-compliant due to a breach of Reg 13.22C. Most auditors don't understand this however the ATO will catch them out on audit.

    Further, in the US - you will need a LLC and therefore the SMSF will not be a legal owner of the asset (property). Same with the bank account which will be in the LLC name - there will need to be a declaration of trust to confirm ownership of the property. Once more, many miss this.

    The LLC will also need to be set up in a certain manner, depending on whether their is a borrowing or not.

    The same complications exist when investing in other countries. All of this is on the Redwood website.

    This are just a couple of issues to understand. However, US property spruikers have found it hard to 'sell' the american dream, due to rising house values in slum cities and a rising AUD. For me, it would be tough to find a really good investment in the US so like anyone you need to partner with the right people over there and visit the property to see what you are getting. There are a heap of gurus around so proceed with care....

    Cheers Ivan
     
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  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Well said Ivan. For some its a mugs game with traps. Trusts in USA can be considered evil. A SMSF is a trust.