Property & Infrastructure Funds Unlisted Property Trusts 2022

{Note from mods: this thread continued from thread Unlisted Property Trusts 2021}

@Big A @DanW I am thanking the internet gods for sending me to this thread. I'm fairly active on a US similar real estate forum, but didn't know about this one till last night. Can I please pick your brains? Will try to be as concise as I can.

I'm American, husband is Australian, we are based in Dubai, moving into our home in QLD in July/Aug time. I'm very familiar with syndications (unlisted trusts) in the US, as I'm an SEC registered rep, specializing in capital raising for these sorts of deals. It sort of happened by accident, as I was looking for an investment property, and someone on a forum like this mentioned syndication. Fast forward a year and a half, and we're invested in 6 deals, personally, and I raise capital for about 10 syndicators.

I've got a pretty decent handle on our US investments/taxes (though the US/Oz tax situation is something I dread dealing with), but I'm still working out the kinks with our Australian finances.

Hubby is nearly 58, will work 2 more years, then retire. I've been crazy busy creating income streams, as ultimately we'd like to live of around 7% income derived from investments, while still growing the capital a modest amount, too. As in, prefer not to simply draw down funds, which seems to be what a lot of people do, right? We use unisuper now, but was thinking about setting up a SMSF, heard esuperfund was good (happy for recommendations), and was planning to do the following - transfer a chunk out of unisuper to invest in unlisted property trusts, have been speaking with EG Private Wealth, looking at SMATs, and thrilled that this thread led me to Centuria and Charter Hall. I had also looked at Fawkner & Avari. Secondly, we were going to pull equity out of our home and invest in either unlisted trusts further, or in maybe a duplex, but the numbers don't crunch as nicely as the trusts do. With the remainder of the super, which would be about 65-70% of it, I'd like to find the equivalent of CEFs (I think you call them managed funds?). I saw some equity income funds on a site called betashares, but still researching & trying to find funds that can offer around the 7% mark. In the US, I trade them actively, trimming profits to grow investable capital, and collecting dividends on those not yet hitting profit target. Wouldn't mind either a similar strategy in a SMSF, or reinvesting decent dividends for the next 2 years, till we need the income. Lastly, we are currently in sort of a blend of growth & income strategy now (in my US stuff in a private equity bitcoin mining fund, in metaverse property, quantum computing, EV, etc), but would ultimately like to shift towards more set and forget, as I'm spending more time than I'd care to on retirement planning.

Sorry for the long back story. My questions to you guys-
- thoughts on the strategy?
- thoughts on this SMSF? Any words of warning?
- if we pull equity from our property to invest in unlisted funds, can we have the same tax benefits as we would if we used the funds for a rental (I think the answer is yes)?
- thoughts on any other managed funds I should look at?
- have you seen funds to their exits, ie what were overall returns?
- do you recommend a financial planner, if so, any recommendations? I hate the idea of paying like 1% to a planner, but if he/she is fantastic and can help with our strategy, I'm open to it.

Thanks so much. Appreciate any insights you have.

 

SMSF are not the bounty it might seem at first sight. Many people, accountants and financial advisors included move back from SMSF to industry funds as SMSF are work for limited advantages. So far the only model that makes sense to me is to have a SMSF purchase the commercial property in which your business operates. Otherwise, stick to a cheap fund that allows you to pick index funds. Just beware a few people still spruik SMSF but almost always have a vested interest to be engaged to set it up and run it longer term, accounting + audits can be $1k+year so a good business for them.

 

- thoughts on the strategy?

seems sensible

I would be careful with the betashares or AU equity yield chasing strategies - not a lot of yield these days and a lot of potential downside from a total return perspective

given that you seem to be cluey on digital asset space, you may wish to add some stable coin lending (7-9%) or farming to the mix (easy 20%+ APY) with the main risk being USD/AUD currency fluctuation and smart contract risk, which you can buy insurance on

- thoughts on this SMSF? Any words of warning?

not really

can't really go wrong with esuperfund if you are just buying unlisted property funds and index funds

As you are near pension age, it's not a bad idea to house the income assets in there, given the 0 tax in pension phase

- if we pull equity from our property to invest in unlisted funds, can we have the same tax benefits as we would if we used the funds for a rental (I think the answer is yes)?

yes, it is possible but make sure loans are structured properly - we have good folks on this forum terryw and paulg are good and can help

- thoughts on any other managed funds I should look at?

Other than charter hall and centuria, I have a small position in Trilogy Industrial - decent track record. Not as high quality assets so bear that in mind.

There are some good US opportunity from Crowdstreet that are worth looking at - particularly US multi family which has done very well and is generally unable to be accessed as an asset class in Australia

This is a good resource: https://www.therealestatecrowdfundingreview.com/

Also for new AU deals: Unlisted Fund Research | Core Property

- have you seen funds to their exits, ie what were overall returns?

I have been very pleased with my investments with Centuria and Charter Hall - the higher returns came from Centuria when they were doing single asset trusts, but these were the golden period (2013-2019) - nowadays, it is more diversified, lower capital growth, solid income streams. Notable exits include 8 Central Ave, Zenith, Wentworth Ave. These days, I still have sizable (7 figure position in Charter Hall and happy with them)

- do you recommend a financial planner, if so, any recommendations? I hate the idea of paying like 1% to a planner, but if he/she is fantastic and can help with our strategy, I'm open to it.

Having worked in the finance industry for over a decade, I would not trust 99.9% of the people in it. They cannot truthfully answer the question "are you PERSONALLY invested in what you a recommending me?" I have first hand experience that there is a lot of real estate in the personal portfolios and not a lot of what they try to shill you. Most of these clowns don't even invest, instead they just leech off fees.

 

@Elizabeth_in_Dubai , happy to help and share any knowledge I have with you. Though it looks like you may understand this investing business better than I do. Let me digest it all and see if I can string together something helpful.

 

Hi and welcome!
I really like @bookworm's reply, and agree with most of what they said. Like @Big A said, you seem to already have a good handle on things.

Only a few more things I could add from my personal experience:

ESuperfund:
I've been with for something like 7 years. My feedback is that they are very low cost and I haven't had any problems so far, their platform is fairly automated if you use their recommended broker and transaction account (ANZ Bank). You also do your own coding of transactions on their portal. Their process is generally very slow, after you upload all your end of year paperwork it might be 4-5 months before they do the return. This is not a problem for me really, I'm not in a hurry to pay tax . You don't need to interact with them at all when handling investments, it's just for accounting, auditing and compliance.
However two things you need to do more research on:
1. How good they are in the transition to retirement and retirement income stream phase because we haven't hit that age hurdle yet.
2. What sort of advice you need. Being a budget option I'm not sure how much you'll get out of them. My wife is a tax accountant and so we haven't needed advice and from memory only ever interacted with them through the portal.

REITs/Property Trusts:
Agree with @bookworm on Charter Hall and Centuria. From Centuria I had one of the same exits as bookworm (Zenith Chatswood), and a Charter Hall fund I bought last year had a 9% value uplift 6 weeks after purchase.
We also have units in a few others, there were still some single property trusts coming up last year.
Core property that @bookworm linked is a good intro to some of the managers.
Zenith as well as another Sydney exit, and a Canberra exit have all been positive (high yield over duration + capital gain at the end).
People HAVE lost money though, mostly in the GFC.

Financial Planners:
What @bookworm said. My view is to stay educated and take charge. If too much active management makes it too risky or gets in the way of retirement, then cut that percentage back and go more passive.
My preference is to be diversified and have a solid allocation that doesn't allow any big losses to affect the whole..

Pulling Equity from Home:
This is something we normally do in growth phase, to write off the interest cost as a tax deduction.
With 2 years to go until retirement, it may still be worthwhile but not as beneficial as earlier in life.
A big issue to keep in mind in Australia is that it's hard to borrow without a full time job, the banks don't accept investment income in the full amount as evidence to repay. It could be worthwhile to setup a line of credit for future use even if you don't draw on it now.

A few other points:
-7% income is hard to achieve right now (outside of crypto!). The unit trusts that are returning us 9+% were purchased earlier and had rent increases. In 2021 we only bought one that has a 7% yield and that was in a regional area. There are a few listed unit trusts from Elanor (ERF and ECF) that return 7-8% but their prices are pretty volatile although you can ignore that if you just want the yield.
-Betashares - they are a regular ETF provider similar to Vanguard. I use them for ETF "A200" which is the top 200 Australian market shares just as a passive allocation. It's nowhere near 7% This is a combination of growth and dividend income. Australian shares pay more dividends than US shares, and have some tax advantages in franking credits. They are still growth assets though, and chasing high dividend yielding focussed ETFs generally have poorer performance than pure growth ETFs.
-mix of growth and income like you said doesn't sound too bad. If you try and get 7% yield on every investment you might end up with lower total return. You just have to have that percentage allocation planned out in advance so you don't go yolo on buying investments!
-pulling equity from the house to invest in unlisted funds: the tax benefits will depend on the structure. For the unlisted property trusts paying a high yield, I'd think they're better in the super fund to pay less tax on the income. Pulling equity from the home I'd prefer to use it towards the growth portion of the portfolio.

I wouldn't get too hung up on which managed funds to buy yet, it will take you some time to get the SMSF setup and a strategy, allocation, retirement plan then you can have some single discussions around specific investments after that.

Also if you do use home equity to invest outside of super, instead of your own name you may want a separate trust structure so you can direct the income where you want it later. There's alot of good threads on this. I'm not too knowledgeable of how super works getting close to retirement though so you'd be better to get some advice on how to manage the flow of money into super before retirement.

 

Interedting point about Commercial Prop @Yann

May I ask why not Resi IP?

 

Ill give you my 2cents worth. Keep in mind my knowledge level is based on 6 years of personal research and learnings, which mostly came from this forum. I have also worked with 2 different advisers. I certainly don't consider myself as one of the most knowledgeable investors on this site. Plenty of smart cookies around here. I do know a thing or tow about property trusts as that's what I really dived heavily into at first.

Yes we all want to live of income produced and not sell down assets and hopefully continue to grow the base. But 7% income plus modest growth is no easy feat. Unlisted property trusts that are paying 7% today are not that common. More like 5.5%-6% for the quality managers with good assets. Some still around paying close to 7% that I would still consider. Charter Halls PFA. I still like it abnd have a large holding in it. I think its now paying in the 6's and some people are panicking about the WFH thing and the office being dead. I believe Covid will hurt demand some what for a while but things don't change that rapidly. Good quality buildings in good locations will always be in demand. As the world rolls on, economies and populations grow, more businesses are established more offices will be needed. That's how I see the world working. COF from centuria is a good listed option right now and is similar to PFA. Price at the moment will give you around the 7% your looking for. Other than that there is not much out there that will pay 7% that I like. I personally would stick with charter hall and accept a lower yield. I do like centuria and would also keep an eye on what they offer, but some of their most recent offerings don't excite me.

One last thing on the 7% income. Outside of property trusts and only limited ones that come with additional risks I dont see to many assets offering 7% yields without moving up the risk curve. I see you mention managed funds. Can you really pick a managed fund that pays 7% yield and manages to also outperform the relevant index? I have done plenty of reading that tells me the odds of me picking a managed fund that does just that are slim. My own experience over just the last 6 years having invested at one point in 15 different actively managed funds has proven that I cant do it. And that was with the guidance of 2 different advisers.

On the super front. Not a subject that I have much expertise on as I am long way off being able to access super. Still I have given it some thought and decided SMSF is more hassle than its worth. It looks like you are considering going down that path because you want to allocate your super to unlisted property. I think there are a number of super providers that give you the option of investing in unlisted property trusts with the big names such as Charter Hall. I am on the BT panorama platform and I am sure I have the option of investing super in certain Charter Hall trusts. With that said I have not done so. I am keeping super simple and doing a index based equities strategy of VAS & VGS. I get your closer to retirement age and your time frame for accessing that income is much sooner than mine.

My opinion on all this so far. I get the appeal of high yielding unlisted property trusts. This was me 6 years ago when I discovered them. I had stars in my eyes too and fell in love with them. The adviser recommended I go 75% equities and 25% unlisted property. I went 75% unlisted and 25% equities only because he was strongly against 100% unlisted property. Over the years I have become a little wiser and now I am sitting 50% equities just over 30% unlisted property and the remainder in mortgage syndicates. Actually if your a sucker for yield like me you might like mortgage syndicates.

Done correctly yes.

I currently hold 14 different unlisted property trusts. Have had holdings in another 4 that have ended. The 4 that ended was 2 with Charter Hall being the automotive funds. Both paid a handsome income in the years held and a some solid growth as well.
1 with Sentinel which paid a healthy income with the tiniest growth component at the end.
1 with Centuria. Also a good yield with if I recall the tiniest bonus on capital the end.

The good trusts that have had big growth above the yield tend to continue on for longer. Investors tend me be happy and willing to extend the term.

Looks like you understand enough to be able to do your own homework and make decisions. I believe a planner / adviser is more for someone who has minimal understanding or wants their hand held along the way.

Conclusion. Your strategy is based on a high yield portfolio to achieve the desired income level. Your taking a risk by concentrating your portfolio on investments that deliver a high yield but might end up with lower overall performance.

Lets forget the yield vs growth argument. A 7% withdraw rate regardless whether it comes from yield or growth is above what the research tells us will ensure capital preservation let alone capital growth.


Have I missed anything?

 

I have a hard time enough on here stringing a few sentences together that make sense, let alone writing a whole book.

I like to think I’m better at blurting out my words rather than jotting them down.

 

you may wish to consider a ghost writer on fiverr.com

you have plenty of great knowledge and someone else can do the finesse and wordsmith

 

Well Thank you for your vote of confidence.

I do enjoy sharing and educating while also learning at the same time. Sometimes one can learn while educating others.

 

Thanks for this. Only just seeing these replies now. Our super doesn't give access to unlisted property trusts, which is why we'd consider allocating some of it to a SMSF. The one I mentioned came recommended to me as an alternative that didn't cost a small fortune. Unisuper doesn't really allow for picking of index funds, not to the granularity I'm looking for, at least

 

Thank you for taking the time to reply! Not sure what you mean by bitcoin farming, to be honest, unless you mean mining, in which case we are invested already. I have thought about the loans for bitcoin, might consider it, will see. Would have to see what options there are in the Australian market, as haven't looked into that. Happy to go down any rabbit hole if you point me in the right direction

Re betashares and equity income, the other thing I'm starting to learn is that trades are expensive there, no? They are mostly free in the US, so easier to be pretty agile, setting trailing stop losses and trading in and out of the investments that give higher yields. What I'm trying to wrap my head around is the fact that the model in Australia seems to be to draw down from super, while I've spent ages creating a portfolio in the US that never needs to be drawn down from, ie can live off of the income. I was hoping to do the same in our super, allowing for modest growth post retirement, or at least a modest draw down, to leave plenty for the kids and to avoid needing pension, but I think I've got this all wrong, the deeper I dig.

Re super advice - thank you. Understanding the complexities of the super is like peeling layers off an onion. Every time I think I've figured it all out the next layer presents itself. I've started a list of questions for that, and might have to pay someone to get more granular with me.

I will definitely reach out to the two people you mentioned, too, as it's not really in the wheelhouse of our mortgage broker.

I'm familiar with crowdstreet, but as I mentioned, I'm actually SEC registered and raise capital for US multifamily syndications, as well as a few other niche plays (self-storage, mobile home parks), so I much prefer the deals we raise for, as they are heavily vetted by 3rd parties we (broker dealer I work under) employ. I raise for about 10 syndicators there. For now we've invested in the US market as much as we'd like to, would like to allocate to Oz market too.

Re advisors, yes, good advisors are unicorns. Happy to do this, myself, but to be honest it took me so long to work out our US strategy, so not sure how much time I want to allocate to the Australia investing. It's so time consuming, and stressful, at times. It's such a shame that many of them aren't acting in the best interest of their clients.

Too many moving parts being an American married to an Australian, nearing his retirement age! The bigger picture/backdrop ties into the nightmare tax issues that exist. Times like these I really hate being a grown up.

 

Just had to google AFAIK lol.

Hmm, well definitely not interested in mutual funds. I'm after the equivalent of closed end funds. Argh, more research for me, I guess.

 

Ha, thank you. I never meant to have to dig this deep, but I'm pushing hard to get us sorted for retirement, but it's a serious pain the the backside. I'm like a walking freaking calculator for the past year, and it's taking too much real estate in my head! Just want to sort it all out and chill a bit.

 

Thank you! For some reason I didn't get any notifications that people had replied.

Whew, a lot of info you gave, too. Right, on the esuperfund, good points you raised. Hell, I don't even feel well versed as much as I'd like to on supers. I thought I had it pretty well sussed, but some reading on Friday made me realize I was ever so wrong. Adding your questions to my list of others, and didn't really plan to use them for advice. Feeling like we will have to pay for this guidance.

Re the property trusts, grateful for the names, thank you. There is an individual deal I'm looking at, through EG Funds Management. But the plan is to be in a lot of varying deals, to diversify. Big fan of diversification, like you.

The plan is to have most everything passive, with enough diversification across asset classes and geography to roll with the punches/volatility, and with a variety of sources for income streams.

Re pulling cash out, the house has gone up like crazy, and we are still in the growth phase for a few more years, I think (saying I think as I need to better understand the ramifications better between accumulation vs pension phase). As I'm 53, might still be earning some in the next few years beyond my husband's retirement, in which case the deductions might be good. Was thinking, assuming we stay in Australia, that if we went the rental property route we could sell it sometime down the road to pay off our primary residence. And you raise a good point about the full time job. It's why we're trying to pull equity out now, as working in Dubai is tax free, so he earns more here than he will back in Australia. I didn't, however, know you could set up a line of credit now. We just planned to pull the cash out now, to invest somehow in real estate. Will have to look into that, thank you.

Re 7% yield - yes, it's not easy. It's something I've spent sooooo much time on constructing in our US portfolio. The plan would be to start allocating some of the super to listed unit trusts (thank you for those names), but not all, as still wanting the super to grow, too. Over the next two years, would use any income derived from property or other funds (within super) to simply reinvest into the funds, assuming that can be done. Then we'd get the benefit of dollar cost averaging for the next few years, even though overall growth might be flat or modest. The idea is to shift into income mindset soon. If we were US-based, the idea would be to use 7% income, and another 2+% growth. I've got a few really good, very experienced (decades) mentors who've helped a lot. That balance between quality & yield is same in the US, but you can freely trade in and out for free, which doesn't seem to be the case in Australia.

Having said that, I'm reading that the super isn't meant to be preserved, ie it's meant to be spent down, something I'm struggling to wrap my head around, to be honest.

'Pulling equity from the home I'd prefer to use it towards the growth portion of the portfolio.' - can you clarify what you mean, please? You mean a rental?

Re trusts, yes, have scratched the surface on that. I just wish I could find someone who could say 'right, you need to do x, y and z.'

Thanks again. So much to learn!

 

Have a look at this broker: Commissions | Interactive Brokers Australia Pty. Ltd.
Their pricing structure is the cheapest I've seen if you're trading a good amount, and they have full global access. Their foreign exchange fees and borrowing rates are also way cheaper than Australian banks.
They can also do a transfer of US shares into the account, I'm about to transfer some of mine from another Australian broker that uses a US Broker custody arrangement.

Regarding what you've done setting up your US investments - is there any reason that can't continue? I'm not sure of the taxation and citizenship concerns, but having US investments as an Australian is very common. We have to do this form https://www.irs.gov/pub/irs-pdf/fw8ben.pdf and then usually pay a small withholding tax. If you're still a citizen in the US I don't know how that would work but you'd have to make sure they don't try to double tax you...

I might have misunderstood where you got the 7% yield from, I had thought you meant passive income only. Are you saying your yield is higher because your trading is generating the extra yield? If that is the case then yes I now understand Trading is happening here as much as anywhere else, but most people lose money because they're just going long all the time or gambling on directional options bets. It sounds like you your trading strategy is income based though which is a bit different from the "get rich quick" daytraders.

I'd like to do something similar once retired such as selling covered calls, then if exercised selling puts with a strike price where I'd be happy to buy back into the stock to boost the income. Also that broker I linked above allows you to offer your shares out for the market short sellers to borrow and you'll earn a yield from the short sellers.

Currently crypto trading is my only income based trading, where you can arbitrage the price between a futures contract and the actual asset then collect the difference at expiry. Some examples can be seen here: FTX Premiums - look at the futures premiums chart and sort by the annualised premium. Currently the best trade today can only make 8% because the crypto markets are bearish, but I've had some trades on with up to 60% yield during better times which is pretty insane considering it's totally delta neutral.

I suspect that may be because the majority of people retiring today would have a very tiny income if they aimed to only live off yield. Super has only been there since 1992, people in the workforce before that didn't get a chance to buildup the long compounding growth that you need. It's pretty common in the FIRE community too, they mostly plan to live off the 4% rule and sell less than 4% of the portfolio per year. I think this is a bit risky especially if retiring young.
I guess it really depends on if you plan on leaving an inheritance, or you'd rather spend it all over the next 30-40 years and divide that up by some sort of financial plan/model.

I meant that if you pull equity from your home, then make it a contribution into the super fund (the income portfolio) it causes the loan to not be an investment expense - this means that the interest cost of the loan is not tax deductible. Also I believe you're not allowed to offer loans to the super fund either.
Therefore since the loan funds would be outside of the superfund, I'd prefer to buy an asset that has capital gains (growth) instead of income, because you'll pay more tax on income outside of super and at the same time can benefit from the tax deduction on the interest. If you do go with a trust, you can create a back to back loan from the mortgage in personal name into the trust and then the trust will pay you interest, then you'll pay the interest and make deductions etc. This can't be done with superfunds as far as I know it can't have any financial dealings with related parties.

 

I always forget about Interactive Brokers lol. We have an offshore account with them currently, but sold off a lot of shares last summer to buy a property in the US, so I only look at it every few weeks, just a few thousand bucks there. Didn't think about using them, will have a look at their Oz-based platform. I've participated in the loan of shares program with them, too, in the past. Thank you!

US investments will stay in place, correct. We had originally planned to go straight from Dubai to the US, so I spent about a year and a half diving deep into the options there, learning as much as possible, and starting the investment strategy/tax planning for that market. The taxes are a bit of a pain, and if we had gone there, the IRS taxes supers, which is insane. If we do go there, will just take more tax planning, which is just painful as hell. I'd like to be get to a point where I'm nearing the same degree of familiarity with the Australian market, too, and the differences between the offerings. But the whole thing, trying to get a handle on instruments, taxes, retirement plans, in both countries, it's exhausting.

The 7%, yes, I mean income only, with growth on top of that. This is pretty easy to achieve across both the stock market (eg REITs, BDC's, CEF's) and real estate syndications in the US. In the market, I've only started deploying the CEF strategy about a year ago, learned from a guy who leads a fb group, is a financial advisor, wrote a great book, and spoke for a long time on the phone to me about it. It's completely different from any other strategy I've used, fascinating stuff. The point of the whole way of doing it is to preserve income and increase working capital. He averages at least 9% returns, but his clients only use 7% for income, which grows as the capital grows. We are a fairly tight FB group, help each other out a lot. A lot of the guys who go deep into using technical analysis are getting more like 20+% returns (not including distributions), but it requires a fair bit of work, while I'm trying to pare that back. The day trading, yes, did a bit of that, but I don't like how much time I spent thinking about share prices, and it's so heavily manipulated.

This is the fb group - (3) Closed End Funds (CEFs) for Retirement Income and Equity Trading | Facebook. They also have one for open discussions about specific CEFs here - (3) Closed End Funds - Open Discussion | Facebook

In real estate, in the syndications I raise for, there are normally two types of shares. The first gives a straight 10% return, no skin in the game. The second is 7-8%, depending on the deal, with average annualized returns of around 20%. These deals are all value add, in growth markets (very data driven projects). The deal we're eyeing in Australia anticipates 8.5% distributions, with around 11% or more total returns pa. I would like to invest in a few more, too. Found another debt offering with Avari that offers around 10-11% per year, so might consider that.

Have sold covered calls a bit, need to get back into that. Haven't sold puts, but plan too, as well. A lot of people like the wheel strategy, which I've not done yet. Good way to boost the income, though. But the thing is, I'd want to do this all within a super, if possible. I think esuperfund is ANZ only, so not sure if this is viable.

Re cryptotrading, good for you! It's something I wouldn't mind learning, as have a few friends enjoying a very relaxed life (Thailand & Mexico), living off their very good income from crypto trading. I've got a binance account, but only sitting on a tiny tiny bit of ethereum. My friends sent me all sorts of youtube links, but I feel like I need more time to wrap my head around it, which I can't seem to find just now. Having said that, I just looked at the link. Man, looks like another rabbit hole to go down. Thank you

Re super, interesting points. Not a fan of the 4% rule, but came to that conclusion as a matter of necessity. Both of us were married before, divorces are expensive, so working hard to make the most of the time & assets we have now. If I get this right, hoping to pull maybe only 2% of capital out, and the rest in income. Same in US. We have 5 kids (previous marriages) between us, and would like to leave them with a bit of money when we go. Neither of us will get any from our parents, but it's something I'd like to do for our kids if possible.

'...because you'll pay more tax on income outside of super and at the same time can benefit from the tax deduction on the interest. If you do go with a trust, you can create a back to back loan from the mortgage in personal name into the trust and then the trust will pay you interest, then you'll pay the interest and make deductions etc. This can't be done with superfunds as far as I know it can't have any financial dealings with related parties.'

Are these family trusts?

You've given me lots of food for thought. Here's what I'm trying to work out-
- scenario one - we pull equity out for an investment property. Net yield might be 5%, at least that's what I'm seeing, which doesn't give a lot of wiggle room if rates rise significantly. Plus we might get hit with repairs & vacancies. Over time, capital growth should occur, but unless we bought a place that needed some reno in an up and coming market, this could take some years (or maybe not, but the market is crazy heated now). Let's hope for 5% appreciation per year. We'd do interest only, use income in short term to reinvest, and in two years would add to our income streams. Presumably we'd be in a lower bracket then as super income tax free, right?

- scenario two - take that same equity and put it in an unlisted property trust. As I mentioned, the one I'm eyeing gives 8.5% income, but let's say that ends up being 6.5%, for whatever reason. Aren't we still able to take the same tax deductions as if we bought a rental (outside of super, I mean), if expenses are pass through? And if the underlying assets are also offering capital growth, doesn't it make sense to consider this route? You might sacrifice some appreciation, but might not.

Really appreciate this thread, and my list of questions for the unicorn advisor is growing.

 

Just saw this, thank you for taking the time to write it all!

Overall, the 7% plan in the US is something that I'm fairly comfortable achieving, as I mentioned in another comment I've been lucky enough to be mentored a lot in this space. That's based on a pretty conservative blend of assets, as well. But it is also something that requires a fair bit of attention to maintain & preserve. There's a pretty large universe of CEFs that have never cut dividends, and with a lot of diversification across a lot of CEF's (income and equity), plus a lot of diversification in real estate, I think I've cracked this one (with help from a lot of kind mentors, as I said), and it's still a portfolio that lets me sleep at night, not like a baby, mind you, but not sweating too much over it, either. If the real estate plays out like I hope it will, then we might be able to lower our income percentage target, which I don't mind doing at all, especially as I'd like to spend less time dealing with this. I can live with 5.5-6, and pull a few percent out of the capital, no problem. It's that balance, isn't it, of seeing the pot grow while also trying to live comfortably off of it.

Could I pick something that outperforms? Not likely, but if I'm looking at the portfolio in retirement from an income perspective, the change in underlying share price is less important than the stability of distributions. It's getting the mix right that I fully appreciate is a challenge.

You've invested in all of the unlisted property trusts outside the super, then? Am I correct in thinking that all of the same tax advantages of owning a rental apply to these, too?

We are currently at about 50/50 real estate and shares, and will likely end up shifting a bit more towards real estate over the coming years.

Thank you for all of the companies/funds/trusts you mentioned. I've got a few calls with some other ones over the coming days. Did you look at EG - Managed Property Funds and Avari Capital Partners? Curious to hear your thoughts. EG's current deal isn't on the site, though.

Will also look at BT Panorama. I just want to be able to access more than we can in unisuper.

Which mortgage syndicates do you recommend? Avari, the link above, offers one, too.

Re advisor, I think it's more a matter of feeling comfortable with how things work in Australia, if that makes sense. Maybe not so much on what to invest into, but more about how to plan the retirement part out, as I'm out of my depth there.

'A 7% withdraw rate regardless whether it comes from yield or growth is above what the research tells us will ensure capital preservation let alone capital growth.' - if it's from growth, yes, agree. From income, hope not. Between rising cash flow on property, rising working capital, rising yield on cost on some dividend stocks that are currently set up to reinvest, I am hoping I can get this right. But the trade off is time and thinking about it too much, which is not sustainable. Just trying to get this right over the next two years, so we can create a portfolio that I don't have to think too much about.

And if all else fails, you'll see us cruising in van conversion somewhere

Thank you, again. Super grateful for this site.