Self Managed Super
Can Self Managed Super be used to invest in a residential property portfolio? This was a question from a visitor to my Facebook Page who is retrenched and in his late 50s.
He currently has around $500,000 in super and he is unsure of his future work prospects. At his age, he cannot take money out of his Super without being heavily taxed. However, he can convert his Super to a Self Managed Super Fund (SMSF) and then use that vehicle to buy a residential investment property.
How does this help him?
Well, he can’t take his Super out until he turns 60 years of age, if the rules don’t change by then. But if he converts his $500k into a SMSF now, he can then buy a $500K residential investment property in the SMSF.
How will that benefit him?
The biggest enemy of retirees is inflation, which continually erodes the real value of their capital and income. E.g. the purchasing power of $1m today could well be only $500K in 10 years time. But if he buys a residential property in his SMSF, both his capital and income are protected from inflation.
To explain this further, if the residential property today is worth $500K and is renting for $500k per week, in 10 years time it is likely that the property will be worth $1m and renting for $1k per week; whereas, if he deposited $500k in a bank, in 10 years time it is still only $500k.
What would be the difference in return on his investment?
At this time he might get 2.5% from the bank but with my specifically designed houses and locations we are setting a return of about 4%. In old terms we call that “dollar on the dollar.”
What does ‘dollar on the dollar’ mean?
An example is if you pay $500K for a property and get $500 per week rent. This is fairly high but, in reality, we often get $45 – $50 more in rent than other houses in the area. Our homes are a quality design and we have, in my opinion, and the opinion of many of my clients, the best property manager in Brisbane.
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So, back to our Facebook enquiry, at what time can he enjoy an income from his Self Managed Super Fund investment property?
When he moves his Self Managed Super to a pension phase in retirement he can enjoy the rental income as a form of pension, which will increase with inflation.
In this way you see what I mean about retirees protecting their capital and income from inflation.
If you have any questions or would like to comment please do so at the end of this post.
Best regards and have a great week.
Steve Taylor
If you are interested in finding out more about Self Managed Super and buying an investment property please contact our office to schedule a free, no obligation consultation with Steve and find out if our service is suitable to your needs.
At the helm of Steve Taylor & Partners, Steve Taylor has been delivering expert advice and product knowledge to clients for over 30 years. Steve Taylor & Partners provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.
DISCLAIMER
Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the subject being discussed. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.
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