Building Off Farm Assets with a SMSF
We have a question from a person with a farm property wanting to know more about building off farm assets.
He wants to know what the advantage is in building off farm assets. I often state that a basic law of economics is “the greater the return, the greater the risk.” Conversely, “the lower the risk, the lower the return.”
What does that have to do with building off farm assets?
Residential Property investment is considered by Banks to have the lowest risk. Among the highest risk is rural. Accordingly, residential has the lowest borrowing costs, whilst rural costs are amongst the highest.
How does that help our farmer?
If he had a residential property portfolio and wished to borrow against equity, he would pay residential interest rates (often half that of rural rates.)
An example
A recent client borrowed just short of $1m interest only and only paid 3.9% locked in for 3 years.
Can our farmer use the equity in his farm to buy residential property?
He can but the problem is that he would pay rural interest rates on the entire loan.
Could he use his Super to build a residential property portfolio?
Definitely. Many farmers pay themselves and their partners a salary, with 9.5% going into their Super. Some are justifiably concerned that at a future date the Government of the day may take control of their Super and pay it back to them as a form of pension. There is a great advantage in having control of their destiny by setting up a Self Managed Super Fund (SMSF) and building a residential property portfolio.
I have colleagues who set up a SMSF for my clients. It can be expensive for some but my clients only pay $7.5k. This includes buying two companies and setting up the Self Managed Super Fund. This fee is paid out of their Super.
Read more articles like this?
Visit the Superannuation and Self Managed Super Fund Category on our blog.
Download your Free Residential Investment Checklist
I am often asked what I charge for a consultation. There is no cost and no obligation to sit down and discuss your needs with me. I would suggest that clients bring along a list of questions and there is no such thing as a silly question.
If you would like to discuss building off farm assets, setting up a Self Managed Super Fund and/or building your own Residential Property Investment Portfolio then contact our office and schedule a free, no-obligation consultation.
Steve Taylor
If you prefer to listen here is my radio interview on Emerald 4HI:
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.
Fill and Submit this form for your Free Residential Checklist.
