Thinking about investing in property with your super? Here is some sage advice shared from a Self Managed Super Fund Specialist from Wollongong…
Here at Parents Guide Illawarra, one of us wondered if it may be a viable and effective (because we'd love to dream of a luxury retirement!) investment strategy for a family of four with parents in their mid-forties.
So, we picked the brains of one local Wollongong based SMSF Specialist Troy Mojsoski (CLICK HERE to read more on Troy) to explain it all…
Troy has helped over 300 happy clients navigate their way through the complexities of SMSF. Many of whom are local families and couples wanting to grow their wealth, but do so in a comfortable way as we all know how ridiculously expensive raising a family can be…
Troy - can we DIY a SMSF (ie do it all by ourselves without the likes of you who charge fees)?
Unfortunately not, as it’s a complex process and it’s actually impossible to go down this path anymore without obtaining a Statement of Advice from a qualified Financial Advisor to make sure it is actually a good idea for your personal situation and objectives.
Who typically decides to go down the SMSF path and use their Super to invest in property and what do they need to have in place?
Generally couples between the age of 40-60, often with kids and a combined Super balance of over $200K. (Generally it won’t work out financially with a combined balance of Super under $200K). They want to plan for retirement and are keen to achieve this via investing their Super into property.
It can be common for many of us to be pretty disinterested in our Super and that is one advantage of utilising Super to buy an investment property - it motivates you to pay attention to your investment and potentially add to it helping you to both reduce your taxable income now, and generate wealth for your future.
Troy, can you explain in ‘layman’s’ terms how the process works?
In layman’s terms, my colleagues and I do all the hack work / financial advice / administration that enables my clients to use the money we have locked away in Super to help fund the purchase of an investment property. We set them up and help them manage their SMSF from there.
That process can be time consuming, but that’s what we are here for. It helps you decide whether the SMSF path is appropriate for you. Discussion around your goals and objectives leads us to a financial plan which includes the benefits and costs of a SMSF.
Once an SMSF is set up by us, clients will usually need to borrow the rest of the money via the bank and a mortgage and we help them select an investment
property of their choosing. Clients can then direct their employer to contribute to super along with additional contributions to support the strategy
(up to $25k per year per person). Ideally with the right commitment it wouldn’t be a stretch to say the property could be paid off within say 7-10
years at which point the property is owned outright by your SMSF and you can either:
- Rent it out and that income helps fund their retirement
- Sell the property and use that lump sum to help fund their retirement
- Sell and keep on investing!
Troy, what are the benefits of purchasing property via a SMSF?
Every client’s personal and financial situation is unique, but here are some of the general benefits that can apply and make this so appealing to many couples who want to grow their wealth but do so in a way that allows them to enjoy life with the kids now:
- It's generally far more tax effective: we get tax breaks on extra money we contribute to Super (which in turns means not only do we pay off the mortgage quicker, but we reduce our annual tax bill whilst doing so);
- My clients get help and advice and are more engaged with their SMSF so they make it work better for them, whilst before they may have been pretty disengaged with how their Super was performing. We can help you balance cash flow with a view to paying off the investment in order to help meet your objectives both short and long term;
- Every market fluctuates and whilst not without it’s risks, the property market has shown long term, consistent growth, which makes many people believe that the strategy of using your Super to invest in property very attractive.
- We guide our clients every step of the way to make sure it’s a seamless process that is most likely to deliver them what they want – a step closer to their ultimate retirement!
For anyone wanting to explore this option, contact Troy’s lovely team at Blue Chip Super on 1300 975 999 or firstname.lastname@example.org
Thanks to Troy for chatting to us and for sponsoring this article so more local families can decide if this is a good investment for them!