starting out with smsf

Hi floody

The most powerful part of purchasing property in super is the leverage (ie the ability to borrow money from the bank… which tenants will pay off).  No, it's not smart to pour all your funds into one property.  Better to split the pile of cash into 2.  Or purchase 1 now and another in a year when your fund has a wee bit more cash by means of your salary contributions.

May I ask if you have started setting up your SMSF as yet?  If not, definitely prudent to use a provider to set it up that has set loads of SMSFs up before for the purpose of investing in property.  You would be alarmed to hear how often we see SMSFs set up incorrectly that stumble when they try to get finance for their first property.  Errors in SMSF setups just end up costing you down the track.

Best Regards

I've also found that the costs of establishing the structure (custodian trust) and obtaining the finance can be quite a high percentage of the purchase price for a cheaper property, ie. sub 200k.

With 100K in Super you would probably be looking at a property of circa $300-400K rather than 1 for 250K.

Even with the associated costs (and these have come down considerably over the last few years) you can still get good value with 100K in Super.

We have set up a number of SMSF's for forum members over the last couple of months with a lot less than 100K in their rollover.

Many ways of increasing your balance / lvr.

Cheers

Yours in Finance

You might want to consider going for as high an LVR as possible and then parking the cash of the SMSF in a 100% offset account attached to the loan. This will save the SMSF interest and keep the funds available. With SMSFs once you pay a loan down you cannot reborrow it.

Hi Floody

Yes ideally i think in your situation i would be looking at something circa 250K however i was merely saying that you could go to 400K.

Cheers

Yours in Finance

Not sure if you have already made a decision yet or not @floody but you should probably look at getting a statement of advice done.  As you need to take into consideration a few more factors like your age, desired retirement age, liquidity required in your investment, returns required to achieve retirement goals, your family and their needs etc etc.

as far as getting an official statement of advice (SOA) done, you could probably wangle your bank into a free one (if your not opposed to getting sold a loan or term deposit from them haha). 

Otherwise there are a few good independent advisers around who specialise in SMSF advice. Look for one who is an accredited SPAA SMSF adviser… this means they have done extensive SMSF training.  Normally you can get statements of advice for around a grand. (but if to do with your SMSF can be payable by your SMSF).

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Sorry Ivan have to disagree there.

As SMSF Specialists we have assisted many a forum client to purchase a property for less than 200K.

Capital Growth is one element however you cannot retire on capital growth unless you realise the asset which could (depending on whether you are pension or accumalation phase) trigger a CGT event.

We focus on yields for our SMSF clients as certainly you can retire on income.

100% loans are available to SMSF's if done by way of a related party loan which can certainly be a cheaper all round way of financing the deal.

Cheers

Yours in Finance

If the banks and the ATO felt that capital growth was the most important factor to a SMSF, they'd be stipulating so in their lending criteria and investment restrictions.  Conversely, the banks demand a minimum yield, and have restrictions on postcodes they will lend to.  It is thus fair to say that the bank is more concerned with yield.  This is, after all, what will repay their loan and subsequently provide income for the SMSF members in retirement.  Capital growth is no good to you if:  the rent falls far below being able to cover the mortgage and holding costs…. or if the capital growth simply doesn't happen (and meanwhile you are paying through the teeth to prop up the mortgage)… or if you don't sell it.  The ONLY way to access capital growth in a SMSF is to sell the property.