Property investment Portfolio with a SMSF

I have received similar questions from two different couples about building a property investment portfolio in a self-managed super fund. They don’t own property, have little in savings but both have about $220,000 in super.

The first couple, both are working and between them, earn about $200,000 per annum. The second couple, only the husband is working, a school teacher with a salary of $88,000 per annum.

Let’s take the school teacher on $88,000 per annum. How could they begin to build a property investment portfolio in their situation?

Of their $220,000 in super, they would need to use about $178,000 to buy one of our executive 5 bedroom homes in Brisbane. For a home worth $500,000 they would need 30% deposit, that is $150,000 plus allow $28,000 for legal’s, stamp duty and setting up the self-managed super fund.

Let’s breakdown the $28,000.

The biggest cost is stamp duty. With my usual clients buying outside their super, they only pay stamp duty on the land. With a self-managed super fund you can only buy a completed house and in this case, the stamp duty would be just over $15,000.

The other costs are legal’s and outlays for the conveyancing, plus bank fees and the cost of setting up the self-managed super fund.

The Big Question!

How much would be their ongoing contribution to service a principal and interest loan, pay rates, insurance, maintenance etc.?

Nothing – What do we mean by nothing!

Based on a salary of $88,000 the employer’s super contribution, @ 9.5%, is $161 per week whilst the after tax cost to their self-managed super fund is only $110 per week to service the loan and outgoings.

To recap, a person on $88,000 per annum, with $220,000 in super can buy a half a million dollar home, pay it off principal and interest and their employer super contribution covers everything.

It costs them nothing and if they want to contribute more to their self-managed super fund they can over time, build up a large property portfolio.

At Steve Taylor & Partners we can organise everything except the self-managed super fund, but we have colleagues that provide this service.

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As to the other couple earning $200k per annum between them, with $220,000 in super now, they can only buy one property at this stage, but they can combine their individual super into one self-managed super fund. If they both contribute the maximum on top of their employer’s contribution, they could build a large property investment portfolio over the years.

Steve Taylor

If you are interested in finding out more about Self Managed Super Funds and buying 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.

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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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