Hi All,
My wife and I are looking at starting a SMSF with the intent of purchasing property.
Have been researching for a year now but have had many conflicting ideas when it comes to how much money you should have before you consider starting up.
I have had figures as low as $100k but some believe anything less than $200k and you are wasting your time.
Would appreciate any thoughts people may have on this matter.
Cheers,
AT.
Hi already taken,
There are a heap of threads on the forums covering SMSF Property and the 'minimum balance myth'.
SMSFs are not for everyone, however they provide choice, flexibility and control, all of which you cannot get with your industry fund.
So what is the minimum balance? it depends.
Generally speaking, with a $100k in super you can very easily purchase a property worth $350k, assuming a 80% LVR and a 20% deposit of between $70-75k, which leaves a cash buffer for you.
Considerations:
1. combine your balance with your partner or trusted friend to increase your superannuation balance
2. Interest rates for SMSF a little higher, generally 5.6% can be achieved very easily
3. Seek advice before proceeding to determine the structure you need to borrow to invest in property (bare trust), and choose the BEST provider not the cheapest
4. refer (3)
Hope that helps!
Cheers, Ivan
Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
http://redwoodadvisory.com.au
Email Me | Phone MeSMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS
Not sure of you personal circumstances and how close to retirement, but as a property investor and an SMSF truste , I am not sold on buying property via this method.
This is just my view, based on my circumstances as I already have a number of properties outside SMSF, so have chosen a more balanced approach with CFD's, FX, shares, bonds, and some unit in a commercial property trust, with some cash for other opportunities.
I also do not like the limits placed on what you can do to the property within an SMSF, as I always like to buy property with the intent to actively create equity via sub-division and development.
Get plenty of advise on this one, For example if the SMSF can only buy one property and not other investments, thats placing all you eggs in one basket, which is one of the fundamental investment mistakes, Just remember Super is for your retirement so treat it like a golden egg!
Also ensure you are fully aware of what your responsibilities are in becoming a trustee and whether you are you wife are the trustees or if you go with a corporate trustee. There are business that will help you manage your SMSF compliance for a fee. I don't find it that hard but I am from a corporate commercial finance background so kind of comes natural to me.
All the best
Cheers
Simon
Hi AT
As has already been mentioned, your balance is certainly sufficient for a SMSF to acquire a property.
Let's pretend you opened a SMSF and bought one property with it, which paid itself off by the time you reached retirement age. Could you live off the rental roll of this one property? Well it depends on the rental yield, but generally no. So your SMSF would need to aspire to acquire more income-producing assets (eg property, dividend-producing shares, term deposit accounts, other or a combination of some of these). But you do need to start somewhere, and one property is one such way to start.
It should be noted that there are very few lenders remaining that will lend to a SMSF with less than $150k in the kitty. In this regard, if SMSF is the route you wish to take, you might consider getting cracking with it before the lending restrictions tighten.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Your personal circumstances are key here. What percentage of your NET worth is your Super?
How many years to retirement?
How much exposure to property do you have outside the SMSF?
If none, why inside SMSF and not outside?
What likely mix are you looking at within SMSF, Shares, Bonds, CFD's, FX, etc..
How much cash you hold outside Super?
You need real FP advice before diving in.
Modernity Investing
Email MeThanks for the feedback everyone.
Only 32 so in terms of retirement age I am a long way off but putting steps in place to make sure I can retire well before then!
Currently 1 IP and on the lookout for number 2 so I see the SMSF as an extension of that and completely agree with needing a diverse portfolio for maximum success.
SMSF balance would be $135k at start up so appreciate the heads up JacM on lenders criteria.
Still obviously a lot of research to do and a FP is on the top of that list.
Thanks again.
Current balance of your super should only be one thing to consider when opening a SMSF.
Balances will grow with each pay cheque.
There are also estate planning reasons to open a SMSF too – taking control of your super benefits and ensuring they are properly taken care of if you were to die.
I've just done a SMSF loan with ST George and it went as smooth as silk.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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