All Topics / Opinionated! / How would you invest with smsf?

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  • Profile photo of tommytuckertommytucker
    Participant
    @tommytucker
    Join Date: 2010
    Post Count: 82

    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.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post 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.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of RedwoodRedwood
    Participant
    @redwood
    Join Date: 2013
    Post 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. 

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
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    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post 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.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of tommytuckertommytucker
    Participant
    @tommytucker
    Join Date: 2010
    Post Count: 82

    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.

    Profile photo of Jimmy86Jimmy86
    Participant
    @jimmy86
    Join Date: 2013
    Post 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.

    Jimmy86 | Future Assist SMSF Specialists - Bris | Melb | Syd
    http://www.futureassist.com.au/setupansmsf
    Phone Me

    Self-managed super specialist administrators and advisers

    Profile photo of tommytuckertommytucker
    Participant
    @tommytucker
    Join Date: 2010
    Post Count: 82

    Thanks Jimmy I'll take a look

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post 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.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    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.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post 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.

    Profile photo of Jimmy86Jimmy86
    Participant
    @jimmy86
    Join Date: 2013
    Post 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!

    Jimmy86 | Future Assist SMSF Specialists - Bris | Melb | Syd
    http://www.futureassist.com.au/setupansmsf
    Phone Me

    Self-managed super specialist administrators and advisers

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Jimmy

    Or of course structured correctly a non bank lender / second mortgagee might have a lower rate of interest than a standard Bank lender.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of DwightDwight
    Participant
    @bigvman
    Join Date: 2002
    Post 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!

    Dwight

    Cashflow Positive Investor

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post 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.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Catalyst

    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.

    <moderator: delete advertising>

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

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