Who is buying investment properties in their SMSF

Curious to know how many people are buying investment properties in their SMSF? Has anyone had accountants advise them about the potential benefits long term?

 

Or the risks?

 

Or the interest rates,Or if they have enough in contributions to cover IP costs and not eat in to SMSF cash reserves etc

 

We bought 2 units in manly , Sydney . Close to doubled and sold . Borrowed to buy that . Was in early days of borrowing to buy in super . Was a pain to organise.

Then bought four more properties , loans on two , cash for two others . Good cap gain on Tasmania , sold .

Long term buys ( townhouses ) in manly and Wynnum . starting to take off. Anticipate keeping.

Have paid off one . Healthy balance in offset of other which along with funds from Tasmanian sale will help pay for a development.

Once that’s finished we might start putting some money into more liquid assets , but depending on what’s happening in the property market , might do another property.

Still time to put more funds in . SWMBO is also a member so that gives us ability to put more in.

For us , it’s just another vehicle to invest in more property.

Cliff

 

We bought about 10 years ago. It grew up, we sold it and bought the next.
I can’t say I got a lot of help from my accountant, it was more about me reading, organising the structures, etc.
Currently not many lending institutions are happy to give $ to SMSFs, though

 

Mqy I ask, if yoy sell your Prop with in SMSF - do you pay CG tax?

@Scott No Mates - you made an interesting point about Rusks... Care to give direction (do not want clickbait articles).

We are planning to start SMSF and buy prop outright with cash.

 

If the trustee of the SMSF sells and makes a capital gain the tax rate could be 0%, 10% or 15% depending on the circumstances. The superfund in the one that is taxed.

 

Not sure about NZ property rusks other than currency rusk but for Oz, you need to consider the purpose ie generation of a ROI (Geared or unheated), prices dropping, vacancies, funding maintenance or refurbishment etc (your usual property risks). Also need to ensure that the SMSF deed allows sufficient concentration of assets in one asset class.

 

Apologies for typo

Re concentration of assets in one asset class - are you reffering this as if we have IPs outside super and if setup SMSF to buy another IP ?

 

Oopsy

Not so much a concentration of assets outside of SMSF but meeting any requirement for diversification within the fund.

 

You are probably referring to this from the ATO

Your investment strategy

 

I am about to once the dust settles on other areas of my life. The first one will probably be a commercial office suite that I will operate my businesses from and sublet the extra space to a complimentary professional such as an accountant or financial planner. With an LRBA loan in place will be able to pay it off within 10 - 15 years conservatively and transfer from bare trust to SMSF proper and collect tax-free rent once retirement age kicks in.

Resi properties can come with an offset and I haven't run the numbers, however with rental income plus annual contributions you can work the debt from both sides.

Also, a strategy to consider, in conjunction with tax and financial advice, for those that have hit the serviceability ceiling with lending outside the SMSF as they are not taken into account with SMSF the serviceability aspect.

 

To clarify - are you saying my existing debts are not taken into account if I purchase through an SMSF?

 

Essentially yes, however the lender will still want to see your overall position.

 

Ok thanks, that is very interesting.

 

Lenders want to see your personal financial profile (assets & debts) to ensure that you're meeting your current financial obligations. The serviceability of an SMSF loan is based on the financial profile of the SMSF fund itself. Your income is relevant because that leads to the employer super contributions. Rental income and consistant volintary contributions are also used for SMSF serviceability.

 

Yes have most wealth in SMSF in IPs (I assume against were most SMSF investors invest?), few bought with no loans, few bought with commercial loans and offsets, few bought under LRBAs (where we lend the funds to our SMSF).
Sold on SMSF held in WA sometime ago too as did not see much future long term CG+.
We actually advised accountant that's how we wish to proceed, he just advised how many to hold under which structures.
Should also take note this was in addition to holding IPs outside of SMSF in various entities first.
We also took control of our SMSF since 1995 I think or 1996.... started to buy IPs only from 2007, but our current LVR in SMSF now is very low around 15% as CG+ reduced it further overtime (selection is vital here too) as we are looking towards exit plan.
You need to really understand the rules and regulations as buying under SMSF differs in many ways (at arms length, cannot access equity for further leverage, renovation limitations, maybe limited by CC and NCC contributions, etc...) so potential risks, finances you can make into SMSF, and whether it really fits with your overall financial situation.

 

We have one in SMSF in Brisbane we are working towards paying down and has worked out great for the SMSF balance. Outside of super though it has been a right royal pain in the bum with our directorships of the SMSF companies continually being flagged by lenders when trying to purchase outside of the super.
Lenders continually flip out when we mention there is a loan under the super and the game of hoop jumping and never ending requests for bits of paper inevitably starts (even though the remaining balance of shares and cash in the SMSF could pay down the loan to less than 100k tomorrow).