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  • Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132

    Hi All,

    Read on the api, we are able to use our super to invest in properties, so called the Self Managed Super Funds.

    Does anyone has a clue how to go about it? Also, are we able to combine 2 supers (say husband and wife) into one "Self Managed Super Funds"?

    Cheers
    Nit

    Avatar of Richard TaylorRichard Taylor
    Member
    @Qlds007
    Post count: 11,190

    Nit

    Yes you are able to Roll over your existing fund into a SMSF subject to complaince and nothing to stop you taking out a SMSF loan.

    In essence the Fund cannot borrow so the property is held through an Instalment Warrant with a Corporate Trustee which takes out the loan and on repayment can be passed to the SMSF without Stamp Duty or CGT.
     
    Likely maximum lvr would be circa 70% on the current climate and with some lenders standard variable.

    A bit of cost involved in setting up the Bare Trust and Corporate Trustee and set up fees can be a little higher as the lenders  legal department wants to ensure the entities are established correctly.

    Other than time to approval time everything else is normal.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
    Email Me | Phone Me

    Mortgage Brokers specialising in Investor Loans. Request a copy of my API interview 0-40 in a decade

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132

    Hi All,

    Is it true that the the costs of running your own Super Fund annually is :

    Setting up your own self-managed super fund (SMSF) can have its advantages, but it is not for everybody. And if you have less than $200,000 in super, then the administrative costs would probably make the venture uneconomical. In addition to establishment costs, you can expect to spend some $1000 to $1500 a year on running your fund.

    Aside from costs, you also need the skills and time to manage your own fund, both of which can prove onerous.

    Currently, have ~$30K in my super, not sure whether if it is wise to make it into a SMSF and use it for Property investment. But the costs of running own funds is bothering me now.

    Also, can i combine my Super and my partner's Super into a single SMSF?

    Cheers
    Nit

    Avatar of Richard TaylorRichard Taylor
    Member
    @Qlds007
    Post count: 11,190

    Hi Nit

    Yes you can combine both you and your partners Super into the single SMSF as long as you are both Trustees and is something we set up for clients regularly as a  Fin Planner.

    Remember running your SMSF there are certain fixed costs such as Accountancy, Audit and ASIC Annual return fees and Bank fees.

    These will relate to a higher percentage portion when you only have a less than say $75,000 than they would if you had $750,000 in  the fund.

    All boils down to the aspect of choice and whether you believe you can outperform a retail fund. Not difficult in the current climate.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
    Email Me | Phone Me

    Mortgage Brokers specialising in Investor Loans. Request a copy of my API interview 0-40 in a decade

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    Qlds007 wrote:
    Hi Nit

    Yes you can combine both you and your partners Super into the single SMSF as long as you are both Trustees and is something we set up for clients regularly as a  Fin Planner.

    Remember running your SMSF there are certain fixed costs such as Accountancy, Audit and ASIC Annual return fees and Bank fees.

    These will relate to a higher percentage portion when you only have a less than say $75,000 than they would if you had $750,000 in  the fund.

    All boils down to the aspect of choice and whether you believe you can outperform a retail fund. Not difficult in the current climate.

    Hi Richard,

    Thnx for your reply. Our combined Super is ~$40k, do you reckon it is worth making it into a SMSF and invest in property? Both myself and missus are relocating overseas next year, so there will be any more super contribution. Any differences will be via through cash top up for mortage loan.

    The thing i like about using SMSF to invest in properties, there is less CGT on our IP purchased via SMSF, if we decide to sell it when we are old.

    Paying $1000 – $1500 annually is like paying body corporates :(

    Cheers
    Nit

    Avatar of Dan42Dan42
    Member
    @Dan42
    Post count: 620

    Hi Nit,

    I personally wouldn't open an SMSF with less than $150,000. At that rate of funds, your fees would be about 1% of your SMSF assets.

    The other factor, when borrowing for property in an SMSF, with $40,000 and a 70% LVR, you could only afford to pay $133,333 for a property.

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    Dan42 wrote:
    Hi Nit,

    I personally wouldn't open an SMSF with less than $150,000. At that rate of funds, your fees would be about 1% of your SMSF assets.

    The other factor, when borrowing for property in an SMSF, with $40,000 and a 70% LVR, you could only afford to pay $133,333 for a property.

    Thnx Dan,

    One question, cant i use cash to top up the 70%-80% LVR?

    Cheers
    Nit

    Avatar of Dan42Dan42
    Member
    @Dan42
    Post count: 620
    nitrodrops wrote:
    Thnx Dan,

    One question, cant i use cash to top up the 70%-80% LVR?

    Cheers
    Nit

    Yes, you can contribute cash to the superfund, provided it doesn't exceed the prescribed limits.

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    Dan42 wrote:
    nitrodrops wrote:
    Thnx Dan,

    One question, cant i use cash to top up the 70%-80% LVR?

    Cheers
    Nit

    Yes, you can contribute cash to the superfund, provided it doesn't exceed the prescribed limits.

    Thnx Dan, will look into the prescribed limits.

    Cheers
    Nit

    Avatar of number 8number 8
    Member
    @number-8
    Post count: 333

    I worked with a company that pumps out many of these structures and deeds each year. I can honestly say SMSF is for the limited few. There are much easier ways to structure your retirement plans. i.e. Super with low cost industry funds invested in the stock market and keeping your property investments external to super due to the flexibility. Property inside super should  be utilised if you have both a lot of time, require the purchase for business premises and are in tune with the complexities of the superannuation regulations (it is much cheaper to organise reidential property external to super and you can access the money to further invest and use at call – before retirement age). I would suggest investing in property via a superannuation  vehicle to astute investors that are already savy in investment properties. Too many companies see this as means to make money from investors without the concern of the ongoing administration and technical nature of the acquisition. This does not mean I would never reccommend the Instalement warrant structure to invest in property, but working inside a company that was only selling this as a product I was able to see it was good for the limited few. Consider other, sometimes more relevant options.

    http://www.birchcorp.com.au 

    Avatar of AAQAAQ
    Member
    @AAQ
    Post count: 44

    Hi Nitrodrops;

    we just did it, rolled mine and my wifes super into our own SMSF and bought a property. Not sure I would do it again as its is painful paperwork wise but we learnt alot.  We had 100k combined and that was only just enough to get a conforming loan as banks requireup to 28% deposit plus closing costs so deposit was 75K closing costs another 20K- house puchase price 270k and it still requires input from super fund as rents dont cover repayments. Also only a few banks have conforming loans- we couldn't go with our regular bank as they didn't have a conforming product. 
    The gamble is- is the house in 30 yrs going to be worth more than 100k would be if placed in term deposit at 5% for 30 years with additional input (ie greater than 472K).
    We picked a good corner site with two street access so in future we may be able to demo and put up a duplex.
    But a good accountant is essential!

    Avatar of number 8number 8
    Member
    @number-8
    Post count: 333

    Your deposit is not enough?

    If you really want to do this,  you can set up an on-loan agreement,  this beats adding cash that will be lost to your super fund for most of your life. This will improve the LVR from the banks perspective.

    Most regular banks are on this now, as with every loan product, the banks also have thier own niches with super products.

    http://www.birchcorp.com.au

    Avatar of maree_bradrossmaree_bradross
    Member
    @maree_bradross
    Post count: 401

    AAQ – would you be able to share the purchase price of the property that you were able to use the $100k in your super to buy?

    Nitrodrops – if your relocating overseas I think you can withdraw your super? Might be worth investigating

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    AAQ wrote:
    Hi Nitrodrops;

    we just did it, rolled mine and my wifes super into our own SMSF and bought a property. Not sure I would do it again as its is painful paperwork wise but we learnt alot.  We had 100k combined and that was only just enough to get a conforming loan as banks requireup to 28% deposit plus closing costs so deposit was 75K closing costs another 20K- house puchase price 270k and it still requires input from super fund as rents dont cover repayments. Also only a few banks have conforming loans- we couldn't go with our regular bank as they didn't have a conforming product. 
    The gamble is- is the house in 30 yrs going to be worth more than 100k would be if placed in term deposit at 5% for 30 years with additional input (ie greater than 472K).
    We picked a good corner site with two street access so in future we may be able to demo and put up a duplex.
    But a good accountant is essential!

    Hi AAQ,

    Can you share with me

    1.) costs of setting up a SMSF
    2.) how much is your annual ongoing costs to manage your SMSF

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    maree_bradross wrote:
    AAQ – would you be able to share the purchase price of the property that you were able to use the $100k in your super to buy?

    Nitrodrops – if your relocating overseas I think you can withdraw your super? Might be worth investigating

    Hi Maree,

    Didnt know i am able to withdraw my Super. Can you direct me to some URLs? i will try google on ATO.
    Relocating to Asia for work.

    Cheers
    Nit

    Avatar of Richard TaylorRichard Taylor
    Member
    @Qlds007
    Post count: 11,190

    Sorry to say if you are moving overseas then the Fund will be non complying as the Trustee will not a Resident.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
    Email Me | Phone Me

    Mortgage Brokers specialising in Investor Loans. Request a copy of my API interview 0-40 in a decade

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    Qlds007 wrote:
    Sorry to say if you are moving overseas then the Fund will be non complying as the Trustee will not a Resident.

    Hi Richard,

    My initial idea is

    1.) set up a SMSF when myself and my missus are still working, use the SMSF to buy an IP before relocating.

    now

    2.) will explore if we can withdraw the Super if we relocate. If can withdraw, will use it to purchase an IP also.

    Cheers
    Nit

    Avatar of Richard TaylorRichard Taylor
    Member
    @Qlds007
    Post count: 11,190

    Nitro

    1) is doable but 2) isnt and would mean the fund would have to liquidate the assets and roll the fund back to a retail fund.

    Arguement being that if the Trustees are not in town how can they be performing the job of managing and assessing the Funds assets.

    Richard Taylor | Taylored Financial Solutions I Mortgage Broker
    http://www.tayloredfinancialsolutions.com.au
    Email Me | Phone Me

    Mortgage Brokers specialising in Investor Loans. Request a copy of my API interview 0-40 in a decade

    Avatar of nitrodropsnitrodrops
    Member
    @nitrodrops
    Post count: 132
    Qlds007 wrote:
    Nitro

    1) is doable but 2) isnt and would mean the fund would have to liquidate the assets and roll the fund back to a retail fund.

    Arguement being that if the Trustees are not in town how can they be performing the job of managing and assessing the Funds assets.

    Thnx Richard,  i will try to explore more.

    Avatar of AAQAAQ
    Member
    @AAQ
    Post count: 44

    Hi Nitro

    Cost to set up SMSF and company to hold property in I think was about 1500 but I'll have to go look it up to be sure, another 220 for the declaration deed and I'm quoted 770 for yearly audit costs by our accountants with one property being held.

    But its hard to find a complying loan as they cant ask for a personal guarantee but some do and some ask for guarantor over 50% LVR.  Also time lag for financial institution to assess and do paperwork was huge we had 30 day settlement and we didn't think they would make it. Still doing paperwork the day before settlement and only got through due to our accountants.
    Maree price of house was 270K we worked out as high as we could go before we started by working back from a 28% deposit and 5% closing costs -turned out closing costs closer to 8% due to extra fees and paperwork. So realistically you can only look at houses in the 240-280 range max

    Brian & Cindy

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