II bought a unit 9 years ago in my own name for $125,000 and have had it leased since then until recently. When the tenants gave notice I decided to renovate the property, putting in new kitchen bathroom carpet and repainting so that it really has seen major improvements. I do not wish to sell it as its in a lovely location with lots more potential for capital growth as it has now been valued by estate agent at $420,000. As I need to build up more money as deposits for other properties is it possible for me to sell this property to my own super fund for say $160,000.(a lot less than its really worth) I have a mortgage of $70,000 which I would pay out of the $160,000. I would expect to lease it out at $340.00 per week. There are a few reasons for selling at $160,000, firstly thats how much my super has in cash, rest in shares plus the stamp duty would be less and the CGT to me personally would be less. I would then have $90,000 deposit to buy other property. The return for my super fund would also be good. Just need to know if this sounds feasible and of course legal.
Originally posted by suelever:I do not wish to sell it as its in a lovely location with lots more potential for capital growth as it has now been valued by estate agent at $420,000.
You have given enough reasons NOT to sell this property. It has obviously performed well for you and with further upside in the pipeline it sounds like it is a ‘hold’ and not sell property.
As I need to build up more money as deposits for other properties
You do not need to sell this property to access the deposits for other investments.
If the property values at $420K lenders will recognise and lend you $336K (80% of the vaue of the property) less any existing mortgage ($70K).
Using these figures you have a potential $266K for use as deposits on other purchases – this will allow you very simply to purchase $1m of property. (Very rough maths).
The key message here is you do not have to sell to release your equity. In fact half of the gains will capital gains taxed even if you sell this property to your SMSF.
If you wanted you could extend your ‘deposit money’ by using a 90% or even 95% lend on this property. At these rates of borrowing your deposit money extends to $308K and $329K (less LMI).
As you can see extending out into LMI territory can be very productive.
is it possible for me to sell this property to my own super fund for say $160,000.(a lot less than its really worth)
If you do sell (I recommend don’t) then you will need to ensure the transaction is at market price.
I will also point out the placing this property in your SMSF will mean that you cannot access the equity as a SMSF cannot borrow money. Whereas keeping the property in your name enables you to do this.
I am not a financial advisor but it seems to me you may be better off using your SMSF for continued share purchases and focus on leveraging off this property in your own name or that of a trust
Hope this helps
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi There,
It looks like you have the perfect cash cow already!If you look at the cashflow angle …. and do not want to haveto fund any of the borrowings out of your pocket, I would suggest.
Refinance completely to a maximum line of credit of $170,000This will give you a cash exposiure of 10.4% ($340×52 divided by $70000-current outstanding amount) thus you will not have any top up at all.
This will give you $100K of deposits if an when needed and you will only pay more per month if you use those deposits. And if you are going to use them of +Cashflow houses then you will have no further exposure.
This means you will not have to work harder as you build you portfolio and is a lot more conservative approach… then as you change or fine turn your investing engine…. you can alter your finances to suit.
Cheers
Kiwi!Excellent response Derek…..people would have to pay $ 100’s of dollars to receive advice that wasn’t half as good as what you just gave.
Sue, be very careful about ‘underselling’ when shuffling….it may save you stamps and CGT….but of course there is a very large and powerful organisation on the other edge of that coin you are flipping around.
The SRO in your state will insist that you have the prop. officially valued such that they receive everything they are entitled to.
I agree with Derek, re-finance as is, and simply keep it ticking along….don’t sell or shuffle….and hence those bigger chaps won’t get a slice of your pie. (Sort of reminds me of the lyrics from Pink Floyd’s “Money”)
Thanks for your comments, I will do just that, hold and borrow against property for further deposits on CF+ properties – finding them is the hard part, in today’s environment,.
Thanks again , your detailed responses were clear, concise and convincing.I just got 2 unconditional last week in NZ ……
Gross yields of
Prop #1 = PP: $79K — Rent $170/week
Yeild = 11.18%
Prop #2 =
PP: $95K— Rent $205/week
Yeild= 11.22%
I Like NZ for a number of reasons:
1. Great Place
2. From There … but now live in Sydney
3. No Stamps
4. Good LVR Leverage if borrowing locally from NZ lenders
5. Good Yeilds
6. No CGT (If your enitiy is structured correctly)
7. You can buy more for your buck (20% difference in exchange rate currently)
8. You can buy more houses for your dollar and spread your risk quicker across multiple houses rather than putting all your hard earnt dollars into one house and if it does not rent you are losing money.
9. legal and accounting system is simple in NZ for off shore investors and locals alike.
Good Luck and if you need a hand with anything then feel free to PM me!
Cheers
Kiwi[baaa]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
