LOCATION, LOCATION, LOCATION OR STRATEGY, STRATEGY, STRATEGY
Published on October 23, 2015
Location, location, location OR Strategy, strategy, strategy?
If you’ve known me for even a short time you’d be very aware of the importance I place on developing strategy around your property investing. Yes, we all know that location ought to be a key part of your property investment strategy, but it’s just that… a part.
Decisions made around a property purchase should be decisions you make to implement your overarching strategy; not emotional or reactionary.
Strategy applies equally to personal property accumulation and that inside of superannuation.
Strategy and Super
If direct property is the right investment choice for your superannuation then a self-managed superannuation fund (SMSF) is the vehicle that allows for this.
The strategy adopted inside of the superannuation environment will be very different to that outside of super.
Strategy in a SMSF is very different to a personal strategy
Some reasons why self-managed is the fastest growing superannuation sector include:
- Transparency: You can log onto your bank and see your balance, have a real estate agent appraise a property or check the value of your shares at any time
- Control: You decide the asset class you want to invest into; you decide when to buy and when to sell
- Tax Free: In retirement your super fund pays no income tax and, if you sell an asset, there is no capital gains tax to pay
- Fees and Charges: You would be very aware of the advertising campaigns that Industry Super Funds bombard television with. Their boast is that they have lower fees. Well, if you happen to have an industry fund check your statement and see if they disclose what they spend on that advertising. They don’t! In fact there are many fees at a fund level that are never disclosed to members; e.g. capital gains tax when they sell-out of something the fund was previously holding in their portfolio.
An SMSF may or may not be the best Superannuation vehicle for you but unless you have knowledge and understanding around the rules, benefits and opportunities you are unable to make an informed decision.
An Example of what property in super may add to your retirement security
Imagine having $150,000 in super today and using that to leverage into a $450,000 investment property inside a SMSF.
You may have just 15 years left working before you retire. If the property only doubled once in that 15 years you would have an asset worth $900,000 and only owe about $300,000; meaning you turned your $150,000 super balance into $600,000 in 15 years.
What if your property experienced one and a half doubling cycles in 15 years and was valued at $1.35m? You would have turned your $150,000 into a massive $1.05m!
You cannot leverage in super; unless it’s self-managed (SMSF)
It’s the power of leverage that makes the difference. Currently you have a super balance and receive a return on that balance. The reason so many are flocking to rollover their super into an SMSF is because their balance can become their deposit and give them the opportunity to control a larger, more valuable asset - and receive returns and growth on that larger asset.
Pay off your SMSF property
Now let’s take this a step further and suppose your SMSF was in a position to pay off (or offset) the principal part of the property loan.
Using the above examples you could have:
- A $900,000 or a $1.35m property asset in super
- With no debt
- Not subject to income tax on the rent
- Not subject to capital gains tax should you sell at any stage during your retirement
Of course, I go back to strategy. You need to have your individual situation carefully looked at and considered because what’s best for one person may not be for another.
I cannot advise, especially in a newsletter, that the ideas above are ones that you should adopt. What I will advise, however, is that you ought to arm yourself with the right knowledge and to that end I would strongly urge you to:
Join us in a short webinar
‘SMSF and Property Explained’
I have invited a specialist self-managed superannuation accountant to join me in two 40 minute webinars to carefully explain:
- What’s involved in me setting up an SMSF?
- What will it cost?
- What does it mean to ‘Self Manage’?
- How much will I need?
- How do I add to my balance so that I can get into property?
- How do I rollover my super?
- What can my SMSF invest into?
- What’s the advantage of leveraging inside a SMSF?
- Will my insurances and income protection be impacted?
At the conclusion of the short presentation there will be a Q & A time where attendees can ask their questions.
- Webinar - 30 to 40 minutes
- Q & A – 10 to 20 minutes
Date and Times:
See below for times for each time zone in Australia.
Register for Session One: Wednesday 4th November (the evening after Melbourne Cup day)
- 4:00 PM in WA
- 5:30 PM in NT
- 6:00 PM in Qld
- 6:30 PM in SA
- 7:00 PM in NSW, ACT, VIC, TAS
Register for Session Two: Wednesday 4th November (the evening after Melbourne Cup day)
- 6:00 PM in WA
- 7:30 PM in NT
- 8:00 PM in Qld
- 8:30 PM in SA
- 9:00 PM in NSW, ACT, VIC, TAS
SMSF and Property Fact Sheet
In the meantime, feel free to download a complimentary copy of our information booklet titled:
‘SMSF and Property Fact Sheet’; >>>here.
How can we help?
To contact MRD regarding property investment opportunities, arranging finance or anything else, call 1300 883 854 or message us online >>>here and leave a message in the comments box.
Enjoy your weekend,
Partnering with you for your investment success.