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I wish we did not own our on PPOR now. Because of the large mortgage, we are really limited in how we can move forward with our investing. Unfortunately, I heard the 'renting is better than owning when you want to invest' too late. Although we could still sell, we are too settled with my mother living with us to do that now.
As other have said, if I was starting out today, I would rent while I built up my IP portfolio.
Cheers, Michael
Hi TonyLyn
If you went to Steve's last market update, then you should now know what type of investor you are at the moment and the strategies Steve recommends to move forward to retirement.
One thing I learnt recently about buying property with a SMSF is that it is more expensive than buying in your own name for a number of reasons.
1. The banks currently are only lending to SMSF for property at their standard variable rate – no honeymoon periods, no special reduced interest rate packages.
2. The SMSF does not buy property in it's normal structure. it requires another bare trust to be setup with all the expenses that go with it so in the vicinity of $1200 to $1800 depending on who sets it up for you.
3. The banks require a Statement of Advice (SOA) which costs around $2000
4. All up it worked out to be about an extra $6k to buy residential and $8k to buy commercial
Although of course there were super fund advantages to buying property but then more restrictions on what sort of property deal for which you could borrow (no development loans).
I found this link which explains a little more
Bottom line is to get a good financial advisor who understands borrowing and using SMSF for property.
A strategy I was exposed to recently was how to build a million dollar property portfolio in 5 to 10 years. It generally involves investing in regional towns where you can pick up a property for around $100k.
Buy one, under market value, renovate and add say $20k in value then have it revalued by the bank to pull out the equity you now have and move to property number 2. Do the same then on to property 3 and then up to property 10. 5 years means you would need to do one very 6 months. Banks won't always revalue the property the way you would like after 6 months so you may need to wait a year for each property. But then that depends on your bank. 10 would be 1 property per year which shouldn't be too difficult.. I'm looking right now…
BUT, the key to making this work is to have at least 20% deposit, buying under market value in towns where the property you buy is always positive cashflow. That's where the education you are doing is used. Finding towns where you can get positive cashflow from these sort of properties and then being able to buy them under market price.
we did this once with one property in Armidale a few years ago but then the family started to grow and so did the need for a bigger PPOR so that's were our attempt at this strategy stopped. So now we get to start it all over again but probably not in Armidale.
I hope this little bit of information helps you on your way. Hang around this site and you're definitely in the right place! There is so much experience and like minded people.
And congratulations in investing in Steve's US Commercial Property fund. I did exactly the same with my super – moved it to SMSF and then invested. I think it's the best place for super to be for the next 10 years!
Cheers, Michael
Last post for today.. I have to turn off my computer now!
We are in the same boat as lisa.jason12 – need advice on structure and a good property accountant in Sydney
We are about to start some serious property investment and need to set up the correct structure before our next purchase. So far we have 2 IP’s in both our names.
Cata, do you mind if I email you?
Thanks
