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  • Profile photo of merlinnnmerlinnn
    Participant
    @claude78
    Join Date: 2014
    Post Count: 5

    Hi Everyone,

    I’m new to the forum and am seeking some seasoned investors advice on my strategy.

    A quick overview of my situation;

    My wife and I currently run our own SMSF and are looking to purchase property as to diversify from the share market. We have about 120k in cash and my thoughts were to buy a small studio apartment outright as financing does not appear to be an option and then finance a 2 bedroom unit as well. Would this be a better option as opposed to buying a higher quality property e.g. 4 bedroom conventional house or not?

    Looking forward to your replies

    Profile photo of Adrian CahillAdrian Cahill
    Participant
    @adriannqld
    Join Date: 2003
    Post Count: 128

    Hi Merlinn,
    Great to see you here. As for your post, not quiet sure why you haven’t gotten good replies yet however it could be due to a lack of detail. To make suggestions there are a lot of grey areas. Firstly, what are you investing for? What are your goals? Why property?

    Generally big picture questions, then later getting more specific.

    Adrian Cahill | AdrianCahill.com Personal Development Expert
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    Here since 2002, however things have evolved over the years.

    Profile photo of merlinnnmerlinnn
    Participant
    @claude78
    Join Date: 2014
    Post Count: 5

    Hi Merlinn,
    Great to see you here. As for your post, not quiet sure why you haven’t gotten good replies yet however it could be due to a lack of detail. To make suggestions there are a lot of grey areas.

    Thanks for the feedback Adrian

    Firstly, what are you investing for?

    Capital growth would be nice as I am not needing a positive cash flow at this stage in super (only 35)

    What are your goals?

    To diversify from the markets and long term own 6 to 10 properties for an income stream in my pension phase (maybe in 40 years pending legislation)

    Why property?

    It is the only gearing option inside super except for CFD’s which I am not a fan off.

    Generally big picture questions, then later getting more specific.

    • This reply was modified 5 years, 8 months ago by Profile photo of merlinnn merlinnn.
    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Are you looking to buy in the SMSF or in your own names?

    If a SMSF it may not be a good idea to buy without finance as the property cannot be later mortgaged or used as security for further investing.

    I presume the apartment is small – is that why you cannot finance?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of merlinnnmerlinnn
    Participant
    @claude78
    Join Date: 2014
    Post Count: 5

    I was looking to buy within the SMSF and yes most of the studio apartments are very small, hence I did not think finance was possible?

    I guess my logic was to acquire 2 x properties ASAP as opposed to just financing one? Could I finance 2 properties with 120k?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Why would you want to buy a small unit? Do you think this would be a good investment? How small are we talking?

    $120k is not much capital to start with. Is the SMSF already set up?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
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    Profile photo of merlinnnmerlinnn
    Participant
    @claude78
    Join Date: 2014
    Post Count: 5

    By purchasing a small unit I thought it would be possible to purchase 2 x properties instead of 1?

    The SMSF has been setup for two years now under a corporate trustee, predominantly share trading.

    Again I thought buy a studio outright and start deriving an income stream of which will also help support the purchase of a conventional 2 bedroom unit. My logic was to buy the studio out right as I would not be able to purchase it after financing a 2 bedroom unit. Being 35 I have a long investment horizon ahead of me.

    Or should I just put the bulk of it into financing a normal 3 bedroom house in the burbs?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    If the SMSF purchased the unit outright it would be using up its cash so may not be able to afford a second unit withtout further extra contributions.

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

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

    Profile photo of Ash74Ash74
    Participant
    @ash74
    Join Date: 2014
    Post Count: 4

    As you are still young it is best to try and finance in your Super as Terry say you can not refinance so best to purchase properties you can get finance that way you are leveraging and building your asset base using the banks money.

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

    Although if you intend to do do act quickly before potential financial reform changes kick in and you are prohibited from doing so.

    Must admit we are knocked off our feet at the moment on the rush of forum clients wanting to set up SMSF’s and have them source a property for them before the 2015 Budget.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    Profile photo of merlinnnmerlinnn
    Participant
    @claude78
    Join Date: 2014
    Post Count: 5

    Well I’m confused now…

    I have spoken to multiple people over the last few days all with various opinions, however one did seem to gel with me. A family friend mentioned I should ditch the unit idea and look for a normal house in the burbs, on a larger block with the option of carving it up later. A bit of digging around and I managed to find a 4 bedroom early 80’s style home on a 780sqm block with a small see view from the master bedroom. The zoning in the area allows blocks to be a minimum of 236sqm. Asking price 320k open to offers.

    Can I please ask the members here for their opinions on this scenario?

    Richard I was in contact with you just before you left the other day, hopefully you can work your magic on our application soon.

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

    Hi Merlinn

    Sure happy to do so.

    Just to throw another log in the fire remember you cannot subdivide the property whilst it is under finance.

    Certainly when the loan is paid off and the security property reverts to the SMSF you can do so as long as no borrowing is required.

    IMHO a lot better off to buy a vanilla style property than a smaller unit with limited growth.

    Cheers

    Yours in Finance

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

    100% Investment Finance now available on selected properties. Email us for further information.

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