As part of our series on Self Managed Superannuation, we spoke to two local experts to get their take on what is happening in the current property market. Here’s Graham Nicolas’ from Burbs Property learned perspective on SMSF.
“Property is an avenue to investment through your Self Managed Superannuation Fund. The advantages of having your investment property within your SMSF is at retirement age the property, if sold, attracts no capital gains tax and no income tax on the earning from the properties.
By investing in property you have the advantage to borrow within that fund, which gives you leverage on your investment fund in other words to use an example you purchase a property for:
$400,000 Purchase Price
$80,000 Minimum Deposit – The act allows up to 80% lend
$17,000 Approximate costs
$303,000 Loan from Financial Institution
You then have an asset worth $400,000 that is gathering equity at average rate of 5% per annum as apposed to the original holdings of $97,000 at average rate of 5%.
Generally the SMSF is set up with 2 members – but can be up to 4 members – with both contributing 9.25% of their salary to the fund via their employers. Together with the weekly rent (on average $400 per week) they can pay off the loan quickly.
The real estate industry within Queensland has been flat for over 5 years but within the last 6 months has started to show small growth. Industry experts are forecasting solid growth over the next three years, particularly in South East Queensland.
In selected locations, regional Queensland is still producing good yields for investors. Let’s look at two current properties in Gladstone.
- Boyne Island price $619,000 with a two year lease in place with rents at $923 per week
- New Auckland price $545,000 with current rent in place for $750 per week to 7th month of 2014.
The laws governing SMSF and the use of property generally favors new properties as you are not able to lend to conduct renovations and can only use the cash component within the fund.
The types of properties that we have within our stock ranges include:
- Traditional house on suburban allotment they range in price from $350,000 – $600,000 with rental in the range of $350 – $600 per week.
- Townhouses ranging from $280,000 – $450,000 with rental from $250 – $500 per week
- Dual key Properties (very popular and great for SMSF) these properties are on one title allotment with costs ranging from $480,000 – $600,000, and rental ranging from $570 – $750 per week
- Duplex properties that allows for a subdivision. Prices vary dependent on size and location.
- Apartments ranging in price from $350,000 – $700,000
For more posts on Self Managed Super: