Hi all, I have some SMSF funds I want to put into leveraging a property but prices in most locations are a bit high. Does anyone have any experience or advice to offer on Tasmania?
Argyle
Phone MeHi Argyle
How many $$ does your SMSF have in its bank account that could be utilized for the purchase of property?
Jacqui Middleton | Middleton Buyers Advocates
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Hi Argyle
We live in Tasmania and all our property investing activities are currently here. Our investing strategy is a little different – we buy high yielding property for our hold portfolio, purchasing below market value which provides an immediate capital gain. Sometimes we need to do something to those properties after purchase to improve yields. Subsequently these properties are being paid off by their own cashflow and also through chunks of profit from projects – flipping property, small subdivisions or unit developments.
The Tasmanian economy is showing signs of improvement as is the housing market. The North West, where most of our investments are, is underpinned by the strength of the agricultural industry with most of our residential tenants employed in agriculture or associated industries. Due to demand for high quality food I don’t see the strength in this industry changing anytime soon. We have also provided accommodation for the seasonal workers from overseas which has been positive for us. The farms employing these people have aggressive growth plans in the coming years so the demand is likely to increase.
There is also good demand for property in other areas – for example downsizers/retirees. There are many people relocating to Tasmania for their retirement, attracted by the laid back lifestyle and non-extreme weather conditions here.
I’d be interested to know whether you decide to do something in Tassie!
TraceyHi Argyle, Jacqui mentioned above, it all depends on how much super you have to use for the property acquisition.
Generally best to invest in a State or location that has strong population and job growth over a variety of industries. Higher growth rates of both typically results in higher growth rates in the value of land. The same can be said for land that is also in close proximity to large scale infra projects incl future schools and retail (this is essentially what helps create long term sustainable job growth).
That being said, you’ll probably find better job and population growth in South East Queensland than in Tasmania where affordability is still fairly reasonable although not quite as good as TAS. The weather and job growth will attract a higher population long term in Qld as as such, I’d expect Qld property to outgrow TAS in the long term. Jump on realestate.com.au and scope out some options. I’m sure you’ll find a few properties that will meet the requirements of your SMSF funds. Might also be worthwhile looking into a few mortgages in possession sales to ensure a low buying cap.
Lloyd James Ross | RPM Queensland
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Hi Jacqui,
About $47,000 that I’m hoping to leverage. Sorry I didn’t reply to this earlier. I didn’t see it.
Regards,
Trevor.
Argyle
Phone MeHi Lloyd,
Sorry, I didn’t see this message when you posted. We actually have two properties in Qld, one near Ipswich and one in Kingston. We got into them through Park Trent. They are both negatively geared and not doing very well at the moment. The market went down after we bought them. No doubt they’ll be ok in the long term but they’ve made us a little wary of Qld at the moment – especially with the resources sector the way it is.
Cheers,
Trevor.
Argyle
Phone MeHi Trevor
The market certainly hasn’t gone down but seeing who you bought them thru I tend to think you probably overpaid for them in the first place.
Let me guess they were both brand new?
$47k won’t buy you much at this moment in time and wouldn’t be enough to use as a deposit to gear into a property inside a SMSF due to the more stringent lending terms in SMSF lending.
Nothing to stop you starting the fund making a combination of deductible and non deductible contributions and then looking to gear up once the fund has a suitable amount invested:
Cheers
Yours in Finance
0-40 properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
Hi Lloyd,
Sorry, I didn’t see this message when you posted. We actually have two properties in Qld, one near Ipswich and one in Kingston. We got into them through Park Trent. They are both negatively geared and not doing very well at the moment. The market went down after we bought them. No doubt they’ll be ok in the long term but they’ve made us a little wary of Qld at the moment – especially with the resources sector the way it is.
Cheers,
Trevor.Hi mate – sorry to hear you used Park Trent – awful bunch of people.
Cheers, Ivan
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Park Trent is certainly not on our Christmas Card list.
Argyle
Phone MeHi Richard,
Yes they were new, one off the plan and as well as being an NRAS property. We were brand spanking new to investment at that stage and bought into the second property far too soon. We are expecting some more funds to become available very soon – $12000 to 15000. We were thinking of looking at Launceston or Devonport where it’s possible to pick up properties at or below $150000. What kind of deposit would be needed from inside an SMSF?
Argyle
Phone MeHi Argyle – your words above make you a perfect candidate for PT – they pry on newbies. A lesson learned. I would be very careful about investing in Launie or Davenport, prices are cheap however, there is a reason there is no AFL team in tassie (apart from my Hawks!), prices are cheap if you get a tenant paying a good yield, however review capital growth numbers, I am not seeing it.
Deposit from SMSF is 10% and must be paid from the SMSF bank account.
Cheers Ivan
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Hi Argyle
Deposit requirement inside a SMSF would be a minimum of 20% but in Tassie likely to be nearer 30%.
Plenty of other liquidity and servicing restrictions etc
Maximum 10% paid upfront (otherwise it becomes an instalment contract) with the balance on settlement. Course if you can negotiate lesser terms then all well and good.
Sorry to hear about the Park Trent fiasco they certainly wouldn’t be on any existing clients Xmas card list.
Cheers
Yours in Finance
0-40 properties in a decade. Ask me how.Richard Taylor | Australia's leading private lender
Ivan, you made me laugh – we don’t have a ‘Tasmanian’ team because of our great players being drafted by the other AFL teams. ;-)
I believe Tasmania is headed in the right direction at the moment . At our last state election the greens won so few seats that they no longer have enough elected members to be considered a party. This means the government of the day has been able to get on with implementing sound, sustainable policy rather than constantly being pulled away in other directions and this has certainly been positive. My understanding is that around the time that Gunns went under the forestry industry reached a point of being self-sustaining on regrowth forestry and this industry is regaining strength, as is tourism. Agriculture has been very strong over a long period and continues to grow (why I like the North West Coast).
The current unemployment rate in Tasmania is less than both Queensland and South Australia.
Once investors are priced out of a booming market such as Melbourne or Sydney they will look to Tasmania which will in turn push prices up so we have been buying over the past 12 – 18 months as I don’t believe Tasmanian prices will go lower.
You will find when doing your research that some markets seem very confused ie. Ulverstone. The asking prices are all over the place there because several agents in Ulverstone ‘buy’ listings. There are also sellers hoping to achieve a sales price today which is equivalent to what they paid at the top of the market quite a few years ago. The reality is that just now we are in a buyers market and some have had to realise a loss to move on.
My link didn’t work: https://www.tas.liberal.org.au/news/365-day-plan-second-quarter-update.
Hi Tracey,
You make some interesting points though I wouldn’t want to put too much store in Liberal Party (or any party) promotional material. Have you had any experience with Burnie?
Argyle
Phone MeLol, I don’t usually believe their blurb nor take much notice of it but I don’t see anything in there that is crap and thought it might be a useful read for people doing some research on the direction of Tas. I don’t read newspapers either because the media rarely seems to be accurate.
Regarding Burnie, it has some terrific yields, even in good areas. I’ve not invested there as I’ve not been comfortable with the employment challenges. Major employers open then close and also that mine workers from the West Coast have families based there which leaves you exposed to mining industry variables. Caterpillar relocating to Thailand is a negative although Dale Elphinstone is a very clever businessman, committed 100% to the NW Coast and I believe he will find a money making opportunity which will provide jobs.
Having said that, Burnie is an area I would look at again if I needed to venture out of my favourite towns because I think the jobs/employment profile may have changed since I last took a close look.Thanks Tracey. Good advice. I’m going cold on the idea at the moment. I hear that the market around the country appears to have peaked and that prices will start to decline a little for a while. Nothing drastic, just a little correction. Might be able to pick up some better prices in a few months.
Argyle
Phone MeI am on the ground down here in Tassie – and yes there are positive signs however these are strictly linked to proximity to CBD Hobart or new public/private spend in an around the growth corridors around Kingston or for bonus points Claredon Vale.
We had a slump in price since 2010 and the recovery has been lead by the upper end of the market with strong sales volumes and rental growth still driving the recovery in strictly in the 5km from CBD Hobart.
My picks are West Hobart (anywhere), New Town (city end), Lenah Valley (city and New Town corner) for growth.
Kingston and further down towards Margate for a growth and yield play.
Clarendon Vale for Yield with some mid term growth based on surrounding area development and gentrification (off a very low base).
Launnie, Burnie, Northern Hobart etc etc have very sporadic population and growth drivers (very patchy) and will be the last ripple of any Tasmanian growth cycle in my humble opinion – do not be sucked in by the yields etc in these areas as all Tasmania is not created equal.
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