Building Off Farm Assets
We attended AgGrow Emerald this year, on July 6th, 7th & 8th. The weather was great and we had a lot of enquiry from the rural sector. Many in the rural sector now realise the advantage of building off farm assets in the form of residential investment properties in Brisbane.
The Main Advantages
A basic rule of economics is ‘the higher the risk the higher the return and the lower the risk the lower the return.’ Banks consider rural loans to be a higher risk than residential investments in Brisbane and charge a higher rate of interest than for residential.
Another advantage of building off farm assets
Once equity has built up in residential properties, they can borrow against that equity and pay residential interest rates.
Farmers are currently buying residential properties in Brisbane in a traditional manner and through self managed super funds. There is no point using equity in their farm to buy residential, as they would have to pay the rural rate of interest. They can either use equity in existing residential properties or from farm profits with a cash deposit.
Many husbands and wives have their own super and when profits allow, pay the maximum allowable into their individual super. They can combine their individual supers into one self managed super and we often do this for our clients.
My role in assisting clients to set up a self-managed super fund (SMSF) is to source the investment medium, the residential investment property itself. I have colleagues who then set up the self-managed super fund.
To buy one of our properties for say $550,000 in Brisbane, I like clients to have $230 – $250,000 in a combined super.
The Federal Government have made it more difficult to get started by increasing the minimum deposit for a SMSF to 30%, with a 15% buffer.
The minimum employer contribution of 9.5% on a gross annual income of $90,000 would cover all outgoings and service a principal and interest loan.
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Although a week is a long time in politics it is looking likely that our next Federal Government will be Labor.
As Labor proposes to ban negative gearing this will remove tax advantages for my clients unless they are set up before the election. If people do want to take advantage of current negative gearing it is important that they do not delay. Demand is so high in the area of Brisbane that I operate, it is often six months before the land is out of the titles office and then the house must be built.
When Paul Keating banned negative gearing in the mid 1980’s, rents in Sydney increased by 60% in 12 months.
The winner of our raffle at AgGrow Emerald was Viv Benz from Springsure. Viv was very happy with his giant bottle of Jim Beam Bourbon in a cradle.
Need help to start building off farm assets in in the form of a residential property investment portfolio? Schedule a free, no-obligation consultation and let’s discuss your options.
Steve Taylor
If you prefer to listen here is my radio interview on Emerald 4HI:
At the helm of Steve Taylor & Partners, Steve has been delivering expert advice and product knowledge to clients for over 30 years. We 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 above subject. 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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