Hi Joey,

Welcome

Quite often the biggest hurdle is a mental hurdle. Knowing “academically” that something is the right path, and actually doing it are two different things.

A big thing is being able to block out the negative chatter from folks who have not done their homework on the topic of property, and trusting the research you have done. It takes a while to realize it is often better not to discuss your property adventures with people who are not on the same path. Small amounts of negative and uneducated chatter can be quite damaging in that it can make you question what you’re doing. Best to surround yourself with those in the know, and choose different conversation topics for those who are not.

I think wilko is saying that the body corp management company may own property somewhere. It may have a mortgage over it. Your strata fees may be sitting in an offset account against that mortgage..

Crossing equals danger. As the boys have already suggested, get over the hurdle of settlement and then untangle the crossed mess ASAP.  This will probably mean having to refinance a bunch of loans.  Either of the boys that have commented could sort this out for you.

Hi Gizzy,

Like any other place, businesses come and go, or adapt to a changing market-place.

There are more than 88,000 jobs in Geelong, spanning multiple industry sectors.  300 jobs is a drop in the ocean.  Simultaneously, other companies are moving into Geelong, creating more jobs.  One such example is the clothing giant "Cotton On" who recently moved their head office to Geelong; bringing 500 jobs to the area.  The net effect is an increase is the total number of jobs in the area.

Hi Harry,

Depreciation is an amount by which you are permitted to reduce your taxable income. Let’s say your salary is $80k and you have a $10k depreciation deduction. You do not get the whole $10k back from the taxman. Instead, your taxable income becomes $70k. Make sense?

If your salary was annoyingly just inside a particular bracket, and you had a $10k depreciation deduction, it might conveniently put your into the next taxable income bracket below (so that the tax you do pay is at a lesser %).

You are correct Catalyst – you don't have to stipulate why you are putting the rent up – but it is certainly the case in VIC that if the tenant so desires, they can take you to VCAT on the basis of rent rise that is not in line with market rent for similar dwellings in the area.

Hi Mat,

As has been mentioned, there is no minimum amount required in super before you can set up your own SMSF.  However if your SMSF aspires to acquire property, there isn't a great deal of sense in setting up the SMSF until the balance is $70k+, because it would otherwise be a little while before it could afford to buy the first property.

When a SMSF buys property, it must pitch in 20% deposit, the stamp duty, the solicitor fee, building and pest fee, bank fees (which can be up to approx $3500 since their lawyers have to read your super fund deeds).  The remaining 80% of the property price can be borrowed from a lender that offers SMSF loans.  So this is why you'd need at least $70k in super to setup and acquire a property.

The balance you have in super ($135k) is certainly sufficient funds to set up a SMSF, acquire its first property, and have a decent pile of money left over towards saving for its second property. Meanwhile your tenants would be merrily paying off the mortgage for you with their rent payments, so that in theory, the property would be paid off by the time you reach retirement age. 

As a rough guide, if you consider the case study of a property that earns $350 per week in rent, by the time you pay its bills (property management, council rates, water rates, insurance), you'd have approx $260 per week leftover.  This figure of course varies depending on the location of the property and the pricetag on the bills.  So this leftover amount of $260 per week is $13,520 per year in income, if the property were fully-paid-off today.  In the future, as rental hikes are applied and bills go up, this figure will look different, but it is reasonable to assume the figure will buy the same amount of groceries as $13,520 can buy in today's terms.

If you have an understanding of how much income you would require per year "if you were retired today" this helps you to see "how many houses you would require if you planned to have your entire superannuation income stream coming from rental properties".  For example, if you determined you needed $35k per year, approx 3 houses would do it.  Does that help?

(Needless to say, you need to ponder for yourself, and perhaps talk with a financial advisor about an appropriate asset split… eg if you should have some of your income in property, some in cash, some in shares etc.)

Purchasing property in super is certainly a very powerful thing, due to the power of leverage (the ability to borrow to acquire the asset, and then let the rent pay the asset off).

As Terry said.  Bad idea paying off an investment loan.  A redraw is not the same as storing money in an offset account.  Withdrawing money from an offset account is just a withdrawl transaction.  However a redraw is a borrowing event.  In your case, borrowing money to buy a non-investment product ( a house for you to live in ) so the interest on the redrawn funds would not be deductible. 

If you purchased something for $400k and the rent was only $400 per week, the rent wouldn't be sufficient to cover the mortgage interest and the bills.