Investing in investment properties can potentially turbocharge the retirement nest egg of Australians looking to retire comfortably and safely.
Zaki Ameer, founder of DDP Property, recommends that investors use their superannuation as part of their overall investment objectives when purchasing investment properties through self-managed super funds (SMSFs).
Ameer says that you can now deposit 20% of your superannuation and 80% from the lender when getting a mortgage.
A $400,000 property purchased for $80,000 plus stamp duty and other costs would result in a super contribution of around $100,000. Instead of investing the super funds contributed by your employer, you will invest your entire super fund.
DDP Property has assisted more than 2000 clients with property purchases during the last ten years. In Ameer’s opinion, it is important to purchase property in areas that are experiencing high growth and demand, even if they are far away from your home.
In order to avoid superannuation or future employer contributions, he opts for lower-priced properties in growth hotspots that have high rental yields to cover all costs.
Previously, we have helped clients find properties with a minimum super balance or combined super balance of $100,000. Being in the market for the long haul is more important than timing the market.
Within the last year, the value of property has increased by nearly 15 percent in Australia’s five largest cities, making property an attractive long-term investment.
In addition to the rent, you should have all required insurances in place – life, income, landlord, and home insurance, all of which should be considered. Your financial advisor can assist you with these matters.”
Ameer points out that there are other costs to consider, such as setup fees for SMSFs and yearly tax filing and audit compliance, yet he believes the long-term benefits should outweigh past gains.
In cases where investors already have an SMSF, but have yet to purchase a property within it, DDP Property can assist in creating additional structures along with its financial planners and accountants to assist with the purchase of an investment property.
By investing in residential property, investors have access to an asset class that they understand and trust without suffering the volatility that comes with other asset classes. Using your SMSF, you can access an initial deposit that you otherwise would not have access to.”
Investors who purchase properties through DDP Property can also benefit from a cashback program.
According to him, it is difficult to overcome the costs associated with commissions, marketing, and referrals. The cost of a brand-new $500,000 house and land package is over $25,000.”
A portion of these fees are paid in cash by DDP Property to the buyers.
We charge buyers a one-time fixed fee to guide them through the buying process.
The cashback you receive after purchasing your property can be re-invested into your SMSF.
Investments can be made in property, shares, or any other SMSF-compliant investment.”
Ameer says it is important to seek financial advice before buying a property with an SMSF.
The SMSF Association, the nation’s leading self-managed superannuation body, says trustees should carefully consider the investment strategy of their SMSFs and the circumstances of their investors before making investment decisions.
As per the SMSF Association, a strategy should specify how much exposure the fund should have to the property market, the type of exposure, and how appropriate the strategy is for SMSF members.
It is impossible to set and forget this problem. Among other things, SMSF auditors must make sure that SMSFs have an investment strategy and that their investments are aligned with it throughout the year.