We are thinking of using a company named Capital 360 to help us access and invest our super in more property. We currently have one investment property. We would really like to hear from anyone who has dealt with this firm and also if anyone has any advice re using Super to invest?
KalkatScratchMember@scratchJoin Date: 2010Post Count: 81
not sure how much of your own research you have done thus far, but Tony Melvin and Ed Chan have a book called How To Invest in Property Using Your Super Money. Its a great start to give you an idea of what you are looking at.
I’m not sure what services Capital 360 provide or what they charge, once you know this I would have a chat with your accountant and a good broker and compare the costs.
Hopefully this gives a little more direction.
Thanks for your info, I will definitely be buying that book. I have noticed a few companies now are dealing with helping people invest with their Super. The problem is like everything, you don't learn how good or bad they are until you actually deal with them, unless you get a trusted referral. Capital 360 charge $1800 up front then 2% of any property deals, so a book would certainly be alot cheaper. We hadn't even considered using a broker or our accountant! Thanks for that
KalkatRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 11,915
We have probably settled around a dozen deals for clients buying in their SMSF and everyone has had some form of administration or legal hurdle.
Lenders are still not 100% sure of the legislation and each lenders legal dept interprets the SISA legislation differently.
Rule of thumb you will probably get around a 70% lvr with rates varying from around 7.25% +.
Personally i would not be paying an organisation 2% of the property deal when your Accountant will set up the structure and your mortgage broker can source the loan.
Yours in FinanceEvolveMember@evolveJoin Date: 2009Post Count: 66
I think Richard hit the nail on the head.
You time and money would be better spent educating yourself on how you can use your super (via a SMSF) to purchase property. It seems complex initially, however once you get your head around it it is a fantastic strategy.
I have just been reading from the Capital 360 website here:
I find it interesting that they utilise a unit trust structure – this is totally different to the limited recourse loans (formerly known as property instalment warrants) mentioned by Richard. The main and probably most important difference is that when the property is owned by a unit trust, and the SMSF invests into that unit trust, the underlying property cannot be used for security for any loans – you would need to use another equity source.
Warning – self promotion alert: About a month ago I posted an article on my blog about the 6 ways to purchase property using your super:
I have been personally involved in assisting a number of clients purchase property with their super using the limited recourse loans which have been around for almost 3 years now (well – the law changed 3 years ago – it took the banks a while to catch up and develop new loan products to take advantage of it).
A couple of key things to realise in regards to purchasing property in your super with a limited recourse loan
– It is not for everybody – it is good for people who want to buy and hold – i.e. not looking for a quick increase in value and then flick it off for a profit
– It does costs more to set up – the main killer is the bank legal fees – but hopefully we will see these coming down soon
– Cash flow is king (isn't it always!). You want any property owned by your SMSF to be able to look after itself cash flow wise. Any contributions going in (such as SGC and salary sacrifice) should be built up to act as the deposit for properties #2 and #3 etc – you don't want to be dependent on contributions to cover interest payments and other costs – it is a false economy
– You can still negative gear – with depreciation & capital works deductions you can have a property in a SMSF which is both cash flow positive but has negative income for tax purposes – the negative gearing benefits are obtained via salary sacrificing pre-tax dollars
– You are unable to re-draw on the equity. You need to sell the property to realise any built up equity.
– You can renovate properties purchased with a limited recourse loan – but you can't borrow to do it. You also can't renovate to such agree that you create a whole new 'replacement asset' – so you can't knock-down and rebuild.
I could go on and on about buying property with super – I personally enjoy working through the costs and benefits with people and seeing whether it is for them or not.
Anyway – I am not saying Capital 360 is bad – rather the opposite. I like the fact they seriously look at the most appropriate structure for their clients.
I guess you simply need to do your research and decide what is best for you.
Good luck and please feel free to ask more questions if you have them.
Hi Richard and Kris (Evolve)
Thank you both for your help. We are really grateful for your opinions and experience and have decided to wait and educate/research ourselves further. You have both given us some really good food for thought and some excellent information and common sense suggestions, which we otherwise would not have realised. I'm sure you'll be hearing from us with more questions as we get our heads around this. Once again, thank you
Kalkatmaree_bradrossMember@maree_bradrossJoin Date: 2007Post Count: 401
There was an article on SMSF in yesterday Fin Review – I have a copy here if you want me to scan it and email to you
I would appreciate reading it if it wouldn't be too much trouble, thank you! I think one of the best things we could have done was join this site, thanksmaree_bradrossMember@maree_bradrossJoin Date: 2007Post Count: 401
no worries – let me know your email addressnumber 8Participant@number-8Join Date: 2010Post Count: 333
We have come a long way in this space, I am exchanging on an office purchased for my company by my SMSF today. What a great vehicle for both wealth creation, not to mention a place for your business to occupy. You may also buy a property that you may occupy in retirement.
The process is a little complicated, but the help/ guidance from Accountant's and Financial Planners is improving across Australia every day. Advice used to be about $15,000 but has come down to as little as $3000 from an accountant or Financial Planner, this would be to set up and structure the acquisition and to sign off on the strategy as is required from the banks. The banks charge about $2000 over and above a normal loan, and the SMSFTrust deed, Corporate Trustee (2 companies), and Bare trust is approximately $2750 (Inclusive of GST).
In the long term this $7750 is made back in year one. i.e. A property of $300k value returns $30k p.a. on historical values (10% p.a.). While the laws remain the same we also have nil CGT in the pension phase. Further, if the SMSF has a shortfall of cash as is typical with negative geared properties, this may be solved by your compulsory super contributions by your employer or salary sacrificing as is required.EvolveMember@evolveJoin Date: 2009Post Count: 66
That is great news Number 8
Good luck with everything – I hope everything runs smoothly with the bank.
Due to the typically higher yields, commercial properties work really well when purchased by a SMSF using a limited recourse loan. The banks typically will only lend up to 65% on a commercial property when purchased by a super fund, and based on this LVR and a gross yield of 9% to 10% a lot of the time the property will be cash flow positive (or maybe only slightly negative).
Cash flow positive property is perfect within a SMSF as you can quickly build up surplus cash via the excess rent and contributions (including salary sacrifice) – which in turn can be used to purchased more property or diversify into other types of investments.
It is good to see the costs coming down in regards to the set up / structure and advice surrounding a SMSF purchase using borrowings.
One cost that hasn't come down however is the bank legal costs – $2,000 plus is such a blatant rip-off – I mean how long does it take to review a SMSF trust deed and the associated docs such as the contract and the bare trust docs – a couple of hours max?
I encourage anyone involved in assisting people purchasing property using SMSF loans to put pressure on the banks to make them put pressure on their lawyers regarding these costs – if the banks want the business they will need to move. I know it is unlikely that it will make an immediate difference – the banks have too much power – but I am feeling unreasonable, and as George Bernard Shaw said:
"The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man."
And I want some progress!
It is always good advice to shop around when looking for a loan provider – and SMSF limited recourse loans are no exception. I have a comparison of current SMSF loan providers here.
I would be interested to hear Number 8's feedback through the process and whether he comes up against any hurdles / issues. Feel free to share mate!
On a related topic, there is a company up in Brisbane which have a total upfront cost of $1500 inc GST to set up and process a SMSF limited recourse loan. The amount includes all bank legal fees, but doesn't include any advice by an accountant / SMSF specialist (including SMSF set up) or the banks loan establishment / application fees.
They use St George and have managed to negotiate a better deal for their clients. They have a couple of noticeable differences to a typical SMSF limited recourse loan (instalment warrant) structure however:
- They have their own special purposes trustee – which holds the title as trustee of your custodian trust for the benefit of your SMSF
- They inter-twine their trustee into the loan / title – meaning if you want to refinance down the track you will basically need to set the whole thing up from scratch – which will be challenging even if possible
- They charge an ongoing % fee on the value of the underlying property
- They handle some of the administration as their trustee company is on the title and also look after any changes if required to ensure the structure stays compliant with any future change to the SIS provisions surrounding limited recourse borrowings
Overall this type of structure has some good points, but it also has some drawbacks – it is up to each individual investor and their advisers to determine whether it is right for them.
I was reading some old posts of mine on another forum – and I was predicting that purchasing property using your SMSF with borrowings would become more commonplace, and that once mortgage brokers, real estate agents and anyone else with a vested interest in property and loans got their heads around how it works we would see it become more mainstream.
I think I can safely say I was right!
Once again if anyone else has any questions about buying property with your super please throw them out there!Sick of SpruikersMember@sick-of-spruikersJoin Date: 2010Post Count: 4
Good afternoon Kalkat,
With regards to Super two of the major banks NAB and Westpac have put together sound policies and products in this area. If you are serious about a long term future in property investing the banks will treat you more seriously if you build a relationship with them direct rather than thru a broker (Capital 360 get a kick back from referring you to whatever broker they have put you in touch with). But remember that like any business bank's are made up of people – some know their stuff and some don't – hence I recommend not committing to any particular lender until you have found the right person within the bank who in your case if not a superannuation specialist themselves can put you in touch with someone who is. In the first instance here I would recommend ringing a Business Banker from NAB & Westpac whose portfolio consists of clients with facilities with the bank of between $1m – $5m+ (you won't find them in the branch, we've been promised the world by 'in branch business bankers' who, with your growing property portfolio will be out of their depth and waste your time).
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