Forums / Property Investing / Help Needed! / Setting up a SMSF – a wise move?

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  • Profile photo of MikkoMikko
    Participant
    @mikko
    Join Date: 2013
    Post Count: 26

    Hi guys,

    I'm looking to set up a SMSF soon, and would just like some advice. I've spoken to 2 companies so far, they want to charge me $1500, and $2000 to get it up and running. Does this seem to be the going rate?

    I want to invest in residential property near a CBD, and grow my portfolio from there. My wife and I are 35 and 34 respectively, and have just over $160,000 in super together. I have had doubts about whether to do this or not, as our current super funds have served us well, with continual growth. Taking our money out of there and into property will also decrease our diversity. We are however, attracted to the leverage that investing in real estate in a SMSF will bring.

    I am interested in hearing any stories / lessons from those who have tread these waters before myself. Or even those who just have an opinion as to what they would do in my situation? 

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,840

    I am no expert in the field of super however there are plenty of opinions out there regarding how much should be the minimum investment required for an SMSF. That amount should also change if you were to have a large exposure to property – typical situation of all your eggs in one basket. 

    You will also have some restrictions as to how much you could borrow as an smsf ie around 70% (max property value will be less than $400k including costs), there may be a restricted range of lenders as well.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    Hi Mikko

    I have to say if they want to charge you $1500 for setting up the SMSF & the Corporate Trustee then that isn't bad at all.

    We charge $1700 + GST and then if you want the Deed updated for free over the next 5 years charge an extra $250.

    Course after you have established the Deed you have to set up the Security Custodian Company and Bare Trust Deed which will be a separate charge.

    In regards to minimum amounts it is interesting that several SMSF lenders have changed their criteria over the last few weeks mainly to limit clients gearing in property where they have less than a given monetary amount. They have also restricted loans on new property and some even require a percentage cash balance too be held post settlement of the property .

    All being equal you should still be able to borrow a maximum of 80% of the purchase price and link a offset account to the SMSF loan to reduce the interest being charged.

    There are some excellent products out there and remember you can still invest your own Super in a similar managed fund to where your retail fund has it invested at the moment.

    Big plus is the flexibility and choice of investment go forward.

    I have managed my own Super Fund for 18 years and would never have it any other way.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of RedwoodRedwood
    Participant
    @redwood
    Join Date: 2013
    Post Count: 340

    Mikko, 

    Re the $1500, is this for the set up of the SMSF and the Bare Trustee, or just the SMSF?

    If it is for both, it is reasonable, if it just for the SMSF shop around.

    Borrowing to invest in property is a great strategy to take control of your super and your retirement nest egg, you just need the right education and advice to get yourself up and running. 

    70% of our clients invest in property, some get carried away and buy 2 properties and get overwelmed. Start with one, get you SMSF set up at the same time get your education around the SMSF and Limited Recource Structure (Bare Trust) and then find the property unless you have already.

    You are in a fantastic position with $160k in super and remember there is no minimum balance, however, manay of my clients can very easily buy a $350k property to start with with $100k in super. That is, 20% up front deposit which you use your super balance plus 'acquisition costs' which includes stamp duty on the property (low for off the plan), SMSF set up costs and bare trust and legals  plus loan costs (i.e app fee and legal fees). With this example you should still have $15-20k in the bank as a cushion.

    You can borrow up to 80% for residential and 70% for commercial. 

    I have many war stories, however for another day, just ensure you receive the right advice as inexperienced brokers/ banks/ accountants can mess up your bare trust quickly and result in some headaches for yourself.

    Ensurte you set up the SMSF with corporate trustee and the Bare Trust with Corporate Trustee for effective asset protection and improved LVR. 

    Hope that helps.

    Cheers Ivan

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

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    I charge $1650 for the SMSF and another $1100 for a company as trustee, but I am a solicitor and include legal advice in relation to the structure of the trust, and trustee company and include BDBN and other succession advice.

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

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of MikkoMikko
    Participant
    @mikko
    Join Date: 2013
    Post Count: 26

    Thanks for your responses guys. I will take it all on board.

    Whilst I have your attention, and off the topic of property investing, I was wondering if anyone had experience with investment bonds? I am saving for my 2 children, and currently have just over a $1k each in Bankwest  Bonus Saver accounts for them. But I'm now considering moving the money to investment bonds, locked away for some time. My children are 3 and 5, and I contribute $10/week to their accounts. I've also read that the funds in an investment bonds can be used as equity for further borrowing. 

    Thoughts?

    Profile photo of thecrestthecrest
    Participant
    @thecrest
    Join Date: 2004
    Post Count: 989

    What are the ongoing costs monthly or annually to have a SMSF please ? and are most basic accountants competent to manage one or is it better with a specialist ?

    If with a specialist, I'd want my accountant subbing the specialist so to speak and keep my trusted accountant in the loop. What do you think ?

    Cheers

    thecrest

     

    thecrest | Tony Neale - Statewide Motel Brokers
    http://www.statewidemotelbrokers.com.au
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    selling motels in NSW

    Profile photo of RedwoodRedwood
    Participant
    @redwood
    Join Date: 2013
    Post Count: 340

    Hi Crest/ Tony,

    My firm charges $89 per month or $1,080 per year. The fees are fixed no matter what type of investments you have and includes Audit.

    Its always better to go to a SMSF Specialist particularly with property investment in your fund. We are having more and more accountants outsource their SMSF service to Redwood for the 'specialist' tag and this is happily disclosed to their clients, particularly the Bare Trust Set up, which we specialise in and all the banks have vetted our legal docs.

    Remember only a ASIC registered auditor can sign off on the audit report, which we are.

    Hope that helps

    Cheers, Ivan

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
    Email Me | Phone Me

    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

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