Forum Replies Created
Hi All[
]Just a few points to discuss,
anyones super fund been losing money in the last few years?
Returns from balanced funds during last year as managed by AMP-ANZ-AXA-BT-Colonial-IOOF-ING-JB Were-Macquarie-Merrill Lynch-MLC & Perpetual average out at minus 5.99%. The best performing was MLC at + 4.2% whilst the worst was AXA at -15.2%problem is i have no control over it and can not have it, invested or rolled into another superfund, without having to quit my job and change…
True, however by establishing a Self Managed Super Fund you can take control over where the funds are to be invested, this is subject to guidelines as set out by the ATO.Unfortunately a self administed fund has high costs attached to it because of compliance regulations and one would normally appoint a company to take care of that angle.
Costs of setting up a fund are in the order of $500 and annual fees for administration and compliance are in the order of $1000 PA. Again using the companies listed above a entry fee is charged averaging out at 3.42% with the lowest at 0.185 % {Merrill Lynch} & the highest 5% {MLC}. Also a MER {Management Expense Ratio} is charged annually and averages out at 1.94% with the range between1.5%{colonial} & 2.21%{MLC}The end result is that it is commonly said that unless one has at least some $ 100K in one’s fund it isn’t worthwhile to run it yourself.
From the above figures the breakeven point is at a little more than $20,000 with the situation improving as the fund increases in size
.
Just to clarify, a superfund should it wish to purchase property must buy it outright as the SIS laws do not allow a superfund to borrow money.
Correct, However a company or trust structure will allow the super fund to be used to purchase a property jointly as a syndicate or in joint names with the holder of the policy [ who can borrow up to 50%].Now for the actual report itself
The Australian Securities and Investments Commission (ASIC) recently tackled one scheme, which involved more than $8 million being released illegally from a self-managed super fund, where the promoter received 20 per cent[
!
It is illegal to charge the super fund directly, however commission may be obtained on the purchase of investment products used by the fund.green]Fund members see a lot of their money tied up in super that they can’t get their hands on until they retire after 55 years of age.
The SIS rulings apply equally to all types of superannuation.Sometimes the release is directed at the purchase of house and land packages; sometimes it is to fund a holiday, to pay off an existing mortgage or fund the children’s education
The selection of investment product has strict guidelines imposed by the ATO.[green]The article seems to be implying that a self administered super fund investing in some properties by rolling over funds from another fund amounts to unauthorised access (if I am reading this correctly), which is rubbish
I agree, the whole article sounds like a beat up.It seems that with super performing so badly over the past few years there is a lot of interest by the public to change their funds over to a SMSF and this may attract some sharks , diligence to select the best service providers is required for both the costs incurred and compliance issues. The new Financial Reform Act due to be enforced in March will impose penalties on those who give financial advice without being PS 146 Compliant.
A study comparing the Asset Allocation as used by Managed Funds and the change in return when a direct property ratio of 40% is included shows a return increase to 25% in one year. The model chosen had the following asset make up 40% direct property,40% shares,10% cash &10 % managed funds.Regards
Brycehttp://www.ipal.com.au
[email protected]Bryce Inglis
Hi All[
]One down and lots to go. It seems as if Dudley, the king of two tiered marketing scams has fled to New Zealand as things are hotting up for him on the Gold Coast.
Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi mcbeath[
]
As I understand the situation, given the small amount of information, your situation is as follows.1/You have 2 negative geared properties and they are in an oversupplied area as evidenced by the problems with vacancy rates.
2/The corresponding yeild is lower than desired , so they are costing a lot to retain.
3/ You are concerned about the risks associated with investing in Austrailian property at the present time.
4/ As such you are wondering if you are better off investing overseas.
5/ You wish to expand your portfolio
6/ You would prefer to include positive cashflow into your strategy.If you would like to work out a plan with me I would need to know more details about your situation in order to conduct a computer analysis
Due to privacy this is better to be conducted offline, where I can work out and propose the plan for you.
This will be made available at no cost or obligation to you.If you wish to discuss this further, contact me on the link below.Please note that I am an investment consultant and not a real estate salesperson.
Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi Prop16[
]
I have just checked it out on the internet and it is a high rise on the Yarra River.
As such I wouldnt reccomend it to anyone.
RegardsBryce Inglis
[email protected]
http://www.ipal.com.auhi 9026a[
]I would urgently suggest you obtain your own valuation before proceeding any further.Also you could well be advised to do your due dillegance on the oversupply, low yeilds and high vacancy rates in regard to this type of investment
Hi mikeej[
]To minimise tax the title can be split unevenly, for instance 20% in one name and 80% in the other.
If the property is negative geared then the 80% can be in the name of the highest income earner,if positive geared the 80% can be in the name of the lowest income earner. this split may be as high as 99% – 1% however the ATO may veiw this in some cases as as tax avoidance.
The terminoligy used for this is “Tennants in common”.In some states if a breakup between the partners occurs then the property is deemed to be owned equally by the family law court, a prenuptual type of agreement may be arranged using a family court solicitor beforehand if you feel it is warranted.
However my understanding is that if the loan is in your name then the bank would want the title to be in your name for security against the loan. There are morgage brokers on the site who could clarify this situation if I am wrong.
Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi stepentc[
]
Give Simon, or one of the other brokers on this site a ring as you have nothing to lose and will be able to obtain specific advice on your situation.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi double2,[
]It is possible for her to buy other properties using the equity in her mothers home.In order to simplify matters the new properties would have to be in joint names.The share of ownership on the title can be adjusted in order to suit the person who is able to provide the nessesary income needed to service the loans.
This way the mother provides the equity needed for the purchase, whilst the daughter provides the loan repayments.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi Mel[
]
On a closer examination you may be right.When I posted my reply I may have miread the situation.Regards
bryce[]Hi jmskin[
]Investing in Australia by a citizen of another country is governed by the Foreign Investment Reveiw Board, their web site is http://www.firb.gov.au and is worth a look as you have to abide with their rules. Basically you will not find them to be too restrictive as suitable investment prperties can be located for you that fit the criteria.
As tax rules are different in the USA in regard to negative gearing, where losses in some circumstances are carried forward and deducted from future profits,it would be better to look at pozitive cashflow investments.
The FIRB require property to be new or off the plan and you will be able to claim a depreciation in the US of 3.64% PA on the building and 20% on the fittings.
I hope the above information is of assistance to you and specific assistance can be given offline by contacting me at [email protected] due to privacy issues.Regards
Bryce Inglis
Hi mender,[
]
The outlook for negative geared appartments in the inner and fringe areas is pretty bleak.Whilst bearing in mind that this is a positive geared site, a discussion of some negative gearing principals are required…Boo …Hiss[]
Negative gearing is the fastest way to accumulate equity and such careful reasearch is required in order to find an area with the fastest capital growth.If it costs you money to own a depreciating asset then there is no point in doing so.
The supply/demand situation in these inner areas means low rental yeilds and high vacancy rates and this reflects in low or negative capitol growth.
Affordability issues also come into play, both with pos and neg investments, so careful reaserch is required for both classes of investment.
70% of our clients use negative gearing as there situation requires this…Boo …Hiss, sometimes this is in conjunction with positive gearing for servicability or to increase their income.
The other 30% of our clients are divided between positive geared investments—Hooray [8D],syndicated investments and self funded super.
The last paragraph is to keep all of you pos geared types from throwing tomatoes at me.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi all,[
]
We are still recomending variable rates to our clients,however the choice is still up to them.
Whilst BIS Shrapnel are forcasting rates as high as 10% by 2006, they seem to be the only ones at the moment to predict this.
There seems to be no evidence thru various banks economic reports to suggest that this will occur at this time.Latest fixed term loan rates do not seem to support any evidence of such a high rise.
The longer a forcast period is then the more innacurate it becomes[If you can term them as accurate in the first place]. However they can be usful in identifying potential risks.
One of the downsides of fixing loans are break costs,this is more of a problem when interest rates are falling.The formula for working out this cost apears to be unknown, even to the banks.
Thi can be a problem to an active investor who may wish to refinance for further investments during the fixed term.
jscot, A prof pack is where a bank will bundle several loan types together and give a discount as a package.They can also be rafered to as portfolio loans or something similar.
Bill & PeterM I agree wholheartedly with you about the historical aspect of fixed versus variable ratesRegards
Bryce Inglis
[email protected]
http://www.ipal.com.auhi chriso[
]
Intrest Only loans are normally used for investment purposes whilst Principal and Interest loans are normally used for home ownership.
If an investment property is paid out fully whilst you are still working, it will cause your income tax payments to escalate and theroretically you could pay out more tax than you earn [at least it looks horrible using PIA Pro].
As the PPOR is not taxed then it is better in most cases to pay it out.
If additional funds or payments are deposited into an IO loan then this is taken off the principal.
Also by minimising repayments with IO loans, you can afford to increase you purchasing power.This is becoming important as affordability of property becomes more of an issue.
Whilst it may seem stange that you are never paying out the loan you will either obtain the benefit of cash flow [called positive gearing] or create equity in high growth areas for later investment use[using negative gearing] It is very difficult to obtain both.
Over a period of time and usually at retirment,one or more properties can be sold in order to pay out the loans as income tax is not as much of a problem if your investments are your sole income.This phase is termed consolidationRegards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi Richmond[
]
My brotherinlaw is the consultant for this project.About a year ago we had a talk about accomodation for this project.
Acommodation was required for 3000 workers,the downside is that only 1000-1500 were to be retained after the construction period of 18 months.
I felt that this would create a surplus and that values may fall after that period,and as such did not reccomend it as an investment strategy.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi powmow[
]
Congratulations.
The most important issue with advising a client is to protect their interests.
Whilst obtaining a commision remember that you are dealing with others in a commision based industry who will have their own intrests at heart.
Protect your client, and if they are paying you money regard it as your obligation to at least save them double the amount.
Take into account their exposure to risk and do the nessesary due dillegance to reduce it
By taking these steps you will be recommended to many others
I wish you the best in your endevours but remember you are operating in the greed industry.
Take the long term and high moral veiwpoint and you will do well.Regards
Bryce inglis
[email protected]
http://www.ipal.com.auHi Josh[
]
First,keep on reading and participating in discussion on this and other chat rooms.It is a great way to learn.
With regards to positive versus negative gearing both methods are relevant in a properly balanced portfolio.
I am listing in point form the differences between the two strategies.Negative
-Must be growth orientated
-Usually higher priced
-Lower rental returns <5%
-Need to be backed up by cash flow or income
-Need to accelerate equity growth quickly
-Careful research & selection needed
-Will flatten out in time
-Usually residential properties in good locations
-Low risk
-Will produce tax creditsPositive
-Produces income
-Usually lower priced residential or 2nd hand residential property
-Usually low growth <3%
-Higher rental returns >6-15%
-Help produce income needed to subsidise high growth properties
-Will eventually grow
-Can fall in value in poor times
-Can include semi residential & commercial properties
-Higher risk
-Income TaxableIt is currently harder to get high yeilds with both as housing affordability is at its lowest level since June 1996.
It is important to get as high a yeild as you can to offset the effects of projected rises in interest rates.
It is also important to study migration into or out of areas as this affects yeilds thru supply and demand.
I hope I have been able to answer your questions simply as many other factors can influence the market forces affecting property investing.Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi Feilds & Bill[
]
Another good read is “The Land Boomers” by Michael Cannon about speculation and the resultant bust it caused in Pre Fedaration Victoria.
Saul Eslake,Chief Economist,ANZ Bank has stated recently that “this is a dangerous time for investment.”
To incorporate only one philosophy as an investment strategy and to not pay heed to changing circumstances is courting disaster.
Areas that meet the 11 second soulutions should not be acted on without taking into consideration all other aspects of making sound investment decisions and common sense.
If proper due dillegance is applied then an overpriced market becomes a scource of opertunity as the best deals are often found in a sellers market.
Regards
Bryce Inglis
[email protected]
http://www.ipal.com.auHi jiee-23[
]
1/ Whilst I am not compleatly sure about the legal side of things this is similar to cases where couples have a large differance in incomes when purchasing negative geared property.
In these cases the majority of tax benifits are claimed by the highest income earner.
This is acheived by setting the Title and loan structure up so that they are “tennants in common” with up to a 99%/1% split rather than “joint tennants” at 50%/50% split.
2/ It is normally impossible to sell off 20% of a property under a normal title as the whole of the property has to be sold,however there are ways it can be done thru a trust or company. Expert opinion would have to be sought to clarify this.
Whilst I have not been able to answer your questions I hope that the advice given can be used as a guide when seeking expert help from the appropriate people.
Regards
Bryce Inglis
[email protected]
http://www.ipal.com.au
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