I'm just throwing a few ideas around to help determine how to possibly invest with an smsf in the next 12 months or so.
I will have $50k in super sometime next year so I think it's about time to pull out of the traditional funds and take control of my own super. I'm presently thinking of 2 broad strategies and would value the opinions of others.
1) buy a 1×1 rundown apartment, perform a simple Reno, turn it into a 2×1 by adding in a couple of walls then rent it out as a share house; or
2) roll it into some form of liquid and diverse portfolio such as cash, gold, reits and some form of index or company that performs well in a downturn (think Nassim Taleb's black swan events). When the next bust happens (soonish) cash out and buy respected companies when they are 50% discounted sort of scenario. I remember in 08 Wesfarmers went from $33 down to $15 then 12 months later back to $30+
Obviously everyone one here has a penchant for property, but nonetheless your opinions would be appreciated as well as any other crazy wild eyed investment ideas.TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
$50k is way too small an amount in my opinion. ASIC recommend $300,000 i think.
1. Would probably be a breach of the rules.RedwoodParticipant@redwoodJoin Date: 2013Post Count: 340
Hi there, re the $50k are you looking at going alone or combining with your partner (if any) in starting an SMSF? If combining you would want to consider the combined amount (assume more than $50k) and structure…i.e corporate trustee or individual trustee.
re secenario in 1, refer to SMSFR 2012/1, very topical and most likely not allowed, assuming you would be using a limited recourse borrowing arrnagement to purchase the property based on a $50k balance. As an FYI with residential generally you can lend up to 80% LVR.Jacqui MiddletonParticipant@jacmJoin Date: 2009Post Count: 2,539
You won't be able to use borrowed money to do improvements on a property in a SMSF… so your SMSF would need to have additional funds sitting in a bank account to cover this.
I did wonder about this. I’ve contemplated making a lump sum contribution to cover any reno or paying for it out of my own pocket depending on what is allowed obviously.
Any reno would only be aesthetic, say $5k max hopefully. Plus whatever it costs to put up a coue of walls. I know a couple of ceiling fixers and chippies so I don’t envisage this to be a huge cost. I may be wrong though I’ve not looked into it much yet. As I said these ideas are only in their infancy at the moment and I still have 6-12 months to solidify an investment strategy.Jimmy86Participant@jimmy86Join Date: 2013Post Count: 46
Any of the finance guys can correct me if I'm wrong, but getting any finance with $50k is going to be tricky. take into account legals, stamps and loan fees your already eating into that 50. not to mention SMSF set up fees ($0 – $3,000), your first years audit (good to have set aside – $500+) + insurances.
And good luck finding a lender that will lend (limited recourse) on something that small…. again, open to be corrected by someone with more finance knowledge.
You may be better off looking into income producing shares for a period while you build closer to the $75-100k mark. (personally this is what I am doing, even though i loath the share market and want to buy prop with my super).
There is a Macquarie SMSF product that allows you to gear into shares. Think the min balance is $40k.
Thanks Jimmy I'll take a lookColin RiceParticipant@fmsJoin Date: 2011Post Count: 338
Thier are restirctions in place in regards to modifications to properties purchased with SMSFs.
Best to seek expert advice on anything outside of repairs and maintmenace to an SMSF property utilising an LRBA.
As far as i am aware their is NO legal minimum amount required to start a SMSF.
Also remember Banks are not the only lenders that provide finance to SMSF.
Yours in Financewilko1Participant@wilko1Join Date: 2010Post Count: 510
1 bed into 2 beds.
Provided you could fund it completely with you smsf no borrowings.
Could also consider if you have external equity available outside of the smsf. Possible Tennant in common or as percentages of a unit trust.Jimmy86Participant@jimmy86Join Date: 2013Post Count: 46
No worries Tommy.
There are a few good options to build up some good cash in a 12 months period to get closer to that required balance to look at property investment.
Also Richard is right, you will most likely be looking at non-bank lenders, but this comes with possible higher interest rates which could negate any gains you make from the property.
Personally, I saw early teens growth in 2012/13 with Equity Lever, and based on a geared balance (so inflated returns on my original balance).
Best of luck!
Or of course structured correctly a non bank lender / second mortgagee might have a lower rate of interest than a standard Bank lender.
Yours in FinanceDwightParticipant@bigvmanJoin Date: 2002Post Count: 42
You can certainly sytart as SMSF with yor $50k. I did so some years ago with a similar amount. It simplk means you take control over your investment. It’s not for everyone, but anybody who wants to take responsibility for their own future and has some experience would find it beneficial to do, IMO.
I personally traded in stocks with an amount that size. After a few years and some more funds added from the work account my wife and I were able to purchase a small, old 1BR rental apartment for cash.
There’s always the passive income fund to consider!
Cashflow Positive InvestorCatalystParticipant@catalystJoin Date: 2008Post Count: 1,404
The reason most people recommend a decent starting amount (I’ve heard minimum $100K) is the cost of the set up. For $50K its just not worth it.
That is incorrect and i have set up many a SMSF for forum clients with 50K.
The set up costs are in the main fixed however as a percentage they are greater for a fund size of 50K than they would be for $250K.
Everyone has to start somewhere and of course there is no legislation stopping 2 lenders lend to a SMSF to purchase a property or invest in shares etc.
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Yours in Finance