Hello all,
I am putting together a paper on using your PPOR as a SMSF investment.
Lets face it how many of you are happy with the performance of xxxx funds.
How much money has been lost by FPs over the last 4 years – answer BILLIONS of dollars … Storm Financial, Westpoint, Great Southern, and many more … peoples lives have been destroyed with bad advise.
Lets assume you can use a SMSF as a partner in your PPOR … yr employee contributions then assist you in paying out the mortgage earlier, look at the compounding interest saving with say 10/12/15% of yr income going into yr mortgage on a weekly basis ????????
Hello government !!!
One main stipulation on people though is that they can NEVER borrow or mortgage more than 50% of the value (two independent valuers) of the PPOR … thus guaranteeing savings and equity.
Think about this … the basic calculation for working out how much super you need by 60/65 is 20 times your current income.
D
OK any thoughts
A super fund cannot purchase your PPOR, must comply with in-house Asset rules. That would also be a ticket for a massive property explosion. Further, property may still be purchased using instalment warrants as the regulations exist today.
I have noted you are quick to bad mouth groups such as FP's (generalisations are often dangerous). Many have never advised risky investments, in fact, like myself many do not charge a fee.
Sorry if I missed the point here, but what is the point of paying your PPOR out early if you can't then leverage against it as it is stuck in your SMSF?
Thanks No.8
Yes I am as well … some days I wonder why with all this compliance stuff … if we make a mistake we go to jail but if a doctor makes a mistake they bury it.
Scratch … How much money did you make in your super last 5 years average … ??
It is a know fact that over the last 5 years the average super fund has performed poorly, right?
If this contribution was paid into a home lone on a weekly basis look at all the advantages … rapid mortgage reduction … reverse compounding interest … less stress on the family to meet monthly payments … equity … etc etc
If 50% of the equity was locked and protected then more people would have more to retire on …
If the other 50% was being paid at a rapid rate "reverse compounding interest" then this could be geared into other positive cash flow investments.
Do the numbers before you criticize …
D
I am not critical of the numbers, just the aggressive attitude towards Planners / brokers etc. not only on this post, but on others as well. I remember your unsophisticated investor post about professionals in the western suburbs…..
Further, you cannot simply come up with an idea just because the numbers stuck up, think of what would happen to the property market? Well, I would vote for you to become PM as this would make me horribly wealthy……
Another, surely you are not the person to assess the stock market on the gains made in the last five years (you must have seen there was a GFC), like all investments, stocks are also cyclical and long term. For the record, I am not a big advocate of stocks, but there is always room to diversify into the equity markets for the many. Further, if you use covered call options you can reduce losses on markets trending south……. it's not all doom and gloom.
Further again, I think you need to read through the Superannuaton ACT – particularly sections 67 (4A) and the many tests
1. Loan must be used to buy an asset (loan cannot be used to refinance an asset)
2. Must be otherwise a permitted asset (must comply with in house asset rules)
3. Asset must be held in bare trust……..
4. Super fund must acquire legal ownership…..And practically speaking, what about all the grey areas – capitalising interest, refinance, property crash, lack of at arms length transactions to release equity prior to meeting conditions of release, concessional contributions limits for people purchasing property $700k+ Please note that SMSF purchase of property through instalment warrants is heavily reliant on income via rent as it is an exclusion to deemed contributions (income test). But a PPOR will be deemed contributions reliant, and default on super fund loan and deemed contributions issues etc etc……..
Further again, again, you cannot ask the question what did your super make in the last 5 years? This is way to simplistic! i.e. investing is all about the strategy, Your portfolio should be diversified e.g You should have some, property, cash, shares , fixed interest etc. If you have a lot of property external to super and many $$$ in equities, who is not to say that all your super money is not invested in cash (low cost industry fund) – in this event a 5% return is fantastic. In fact, would it not be a good idea, in the event of a property and stock market crash, to have alittle in cash. You have to compare apples with apples.
Wealth4Life,
Buying property through your super is a good idea. I agree. It's good because you can leverage your super that is sitting there and turn it into something substantial… however…
You're not allowed to live in any of the property you buy using your super. It is only allowed to be a rental property.
The only way you would be able to do such a thing is if you got dodgy, and more than likely, just plain illegal, by purchasing the property as an investment property, renting the property to a family member, he moves out, you move in but on the books he is still there, you pay him cash, he pays your rent.
You would still have to be paying rent from your regular income into the superfund at equal rates to what you stated you would charge a regular renter on the feasibility study. You can't just rent it out to "someone" at $1 per week. To buy a property through your super, it has to be a cashflow positive investment, or at the very least, any shortfalls in the negative gearing are covered entirely by your regular superannuation contributions. So if you did it this way (dodgy as hell) you'd still be paying rent…but to your own superfund.
And all the scammers out there are ticking over like mad.
Also a reminder, when you buy property through your super, you're unable to access the equity it gathers to buy again. You're stuck at one because it's prison barred behind a trust. If you want to access the equity, you have to sell the whole thing.
Ben,
You have mentioned a relative may rent the property- I think you will find the ATO has issues surrounding non-arm's length income- both purchase and income must be from an unrelated party.
Well then! Wrong again.
http://www.zerohedge.com/article/meredith-whitney-no-doubt-we-have-entered-double-dip-housing
The system is wrong IMHO and we need to change.
Yes there are current laws with our super and PPOR I know that.
A 5% return on super is not enough to keep up with inflation and rising prices.
I don't believe in diversification, neither does Warren Buffet.
Laws can be changed look at the 40% miners tax … what will be the effects on your business when GST goes to 15% NZ just did it.
People are spending their equity if you can't see that you are blind, look at all the reports of how we have changed over the last 40 years especially how we use our home loan to pay bills, LOC is a perfect example.
If you pay rent to yourself it is the same as contributing to your super under my model.
True wealth is built after you have no home mortgage.
A financial planner or accountant works out your wealth by deducting your debts from your assets.
Scammers won't be allowed to access more than 30/40/50% of your equity as set by the government and that means you can't spend over a determined amount of the value of your home, or you go to jail.
If there is a property or stock market crash all will be mitigated anyway, so no argument there.
Thomas Eddison failed 1066 times before he invented the light bulb … the truth is what we are doing now is not creating a wealthy society for the average Australian … we are teaching people how to use credit cards instead of teaching people how to save money and use it wisely … it is financial illiteracy that is creating a poorer society.
At least I am thinking outside the square with a totally new idea that i believe has merit.
D adviser.
Warren Buffet doesn't diversify? Have you seen his real estate? Not too mention his $37 Billion cash account that he had a problem with in 2006 and that he always maintains? Need I go on…….
Like you have mentioned, I think I will let you sort out the 1066 problems with this one.
Warren Buffet makes his money buy "focusing" on making profits that is why he is where he is 1 down 1065 to go thank you.
D
Although i do agree that there are a number of problems with the proposed idea, rather than shooting the idea down point blank, in the interest of a healthy forum discussion why don't we entertain the idea ??
Personally, i think it is kind of nice to have a topic running that isn't the classic, i have my PPOR with X amount and want to buy an IP for Y amount, type question.
Matt, the concern is not the idea, but the critical remarks towards professionals in the game all while breaking one of the most critical rules in planning (diversification).
Since 2000, one corner of Buffett's Berkshire Hathaway Inc. (BRK ) empire has quietly built the nation's (US) second-largest real estate brokerage operation. Minneapolis-based HomeServices of America Inc. — a subsidiary of Berkshire-controlled Mid-American Energy Holdings — now has 357 offices and more than 18,600 agents. Last year, annual revenue topped $1.75 billion, up 19%, on residential sales of $60 billion.
Okay, so he owns a little bit of real estate indirectly……… we all have 357 offices.
Haha one minute No.8 you criticize him then you admire him … when you HAVE bucket loads of money you can do what you want.
Buffet always said "diversification" = ZERO
And I would love to have a 37 billion dollar cash account problem, wouldn't you?
You have been trained or programed to think in a "certain way" No.8 … go with Matt for a while and explore an idea that "could" have merit … stay focused on the topic my friend.
Don't take a fence take a gate …
D Financial adviser
I think you may have missed the point,
What I am saying is that while Buffet says Diversification = ZERO. His actions spell out a different story.
Stocks = Check
Business = Check
Cash = Check
Property = CheckLet me make this clear, I only have admiration for Mr Buffet!
So, a couple open questions;
1) What would be the effect if the rules were changed to allow people to buy their PPOR using their super fund ?
2) To allow the above to occur, would we need to allow people to borrow 80 or 90% LVR as opposed to the current 50% ?
3) Should the available limit for a PPOR purchased through super be capped at say $500 K. This would mean that the people that benefit would be the low to middle income earners who generally struggle the most to buy a PPOR and also have the least amount of super at retirement ?
4) Should we simply allow people to withdraw a portion of their super to be used as a deposit on a PPOR purchased outside of their super funds ?
Hello N0.8 … when you have as much money as one of the richest men in the world you can do with it what you like.
I don't think he is super diversified … recently he made 256 million dollars net profit after an investment in lithium … now he is out. He is an opportunist and smart, focused and calculated to make pure profits then get out, we stay in for too long and lose our money … a true financial planner should be moving investments monthly.
Now he is BIG time into gold, silver, uranium etc … precious metals = focus.
He and people like Kiyosaki and Trump stay away from DERIVATIVES … that is what caused the GFC and it is not over yet my friend.
(most financial planners invest in derivatives of one sort or another) bonds, Storm Financial, Great Southern, Westpoint etc
Now onto Matt.
1) Your super can be a "partner" or a debenture holder of PPOR equity ?????
2) Your super can only be used when there is 50% or greater equity, determined by 2/3 independent valuers, then the valuer is liable and we know how good they are (i mean very good)
3) The target in my world is that very soon your super will own your PPOR and at that point you will not be allowed to gear it – i working on this now with some xl figures.
4) Yes but the critical factor is TRUE VALUE of your PPOR determined by 2/3 valuers.
5) If you are gearing your PPOR for an investment property a licensed financial adviser must oversee the details and tax implications provided by the developer, sales organization, sales person or unlicensed scammer – thus protecting the integrity of the accounting and financial planning industry and get rid of unlicensed people selling bad investment properties returning 2%.
6) Look at the "reverse compounding" rapid mortgage reduction when this occurs …. your mortgage contribution + 12% super employee + your own super top up + etc … this is exciting
7) A $500k mortgage over 30/40 years cost 1.5 million dollars to pay off and 80% of people don't get there (inflation, kids, holidays, cars, boats, extensions etc and life)… my way will have the total debt paid out in under 7 years and save over one million dollars in interest.
imagine the joy of true home ownership and not having to come up with those rising interest rates and undue money pressures … just imagine a life of less stress and pressure … it truly can be done if we do it a different way.The great Wallace D.Wattles wrote a book in 1904 … The science of getting rich – read the book … understand the concept of we have been taught to do things in a certain way … my question is this certain way the right way and my answer is NO because it is not working.
I am a super positive person when you get to know me … the point I am making is if we keep doing what the governments and institutions are telling us to do we will become worse off … it is happening now … this financial mess began in 1971 … read the conspiracy of the rich.
The answer of the governments as they get further into trouble is raise taxes … HELLO … the interest rates are rising because of inflation … you can tax the rich and their companies who employ the greatest number of Australians then what are they forced to do … invest outside Australia put up prices or reduce staff which creates inflation.
If you are a tall poppy get ready for higher commodity prices, petrol, electricity, local council, rates, toll ways, pay as you go … oh god sorry that's happening now … I must be wrong, not.
How much super do we need to retire … answer … 20 times your current earnings … $70,000.00 x 20 = $1.4 million not including the PPOR
Nothing will change until enough small people have enough guts to stand and fight … this 40% will increase building costs and raise inflation … so if you are a PAYG and not a business owner get used to being poorer.D … am I wrong N0.8? and if I am tell me why the average Australian (the majority of the population) is worse off today than 2 years ago … not having a go at you in any way.
Hi Wealth4Life
To clarify some of my questions… i understand the current rules and regualtions around SMSF.
My questions were more so based around the concept of 'what if as property investors we could write the rules ?'
What would we propose differently to what is currently in place, and what effect (good or bad) would that have on the econcomy as a whole as well as on specific indivuals.
Hi Matt this is just one idea … I don't think property investors can write the rules … I think the rules should be written after careful discussion by licensed people.
I like the idea from a gearing point and to "protect" the asset and increase FAST equity.
A super fund is a future savings account ??
Why not use it to save interest on the PPOR – this one debt is the GREATEST burden to mums and dads.
My brother is a very wise man IMHO … he said to me recently "isn't it stupid that when we get married the average person spends 40 years paying off their home?"
D
D
Where do I sign, you had me at Hello…….
imagine the joy of true home ownership and not having to come up with those rising interest rates and undue money pressures … just imagine a life of less stress and pressure … it truly can be done if we do it a different way.You must be logged in to reply to this topic. If you don't have an account, you can register here.
