$130,000 Super Boost with SMSF Investing
How would you feel about adding $130,000 to your superannuation in just under a year. Find out more about this real-life success story of one of our valued SMSF clients.
A happy Family increases their nest egg and long term wealth
Imagine adding $130,000 to your superannuation balance in under a year. This is exactly what one of our clients, a family with two young children from Sydney, achieved by investing in a high cash flow, high growth property in Perth. In this real-life case study, discover how everyday Australians can leverage their superannuation funds to boost their retirement savings through property investing.
Background
Our client, a family from Sydney with two school-aged kids, approached us in August last year and wanted to grow their retirement savings by investing in property within their Superannuation. Juggling busy jobs and family duties, they were frustrated with the performance and limited control of their regular Superannuation fund. They already owned their Principle Place of Residence and two other investment properties, so they understood the benefits of property investment. They had considered purchasing another property for their Self-Managed Super Fund (SMSF) for two years but couldn't find the time to make it happen. Wanting advice on which location and property to choose, and how to navigate the SMSF process, they heard about start2invest from a friend who'd recently done the same, sparking their interest to learn more.
Getting Ready
Before starting to work with us on their sourcing strategy, our clients had to get ready and implement the required structures to purchase a compliant property within their superannuation fund. Here’s what they did:
1. Engage Professionals
They first consulted with a qualified investment adviser and tax accountant to ensure their investment strategy was sound and compliant with SMSF regulations. This step was crucial for navigating the complexities of SMSF property investment and ensuring all financial and tax implications were properly addressed.
2. Set Up the SMSF
Registration with ASIC: They established their SMSF, registering it with the Australian Securities and Investments Commission (ASIC). This involved creating the fund, nominating trustees, and rolling over their existing superannuation into the new SMSF.
3. Develop Investment Strategy
With the help of their advisers, they created a comprehensive investment strategy tailored to their retirement goals. This included drafting necessary documents outlining the SMSF’s purpose and compliance with the sole purpose test.
4. Establish a Bare Trust
Trust Formation: They created a bare trust to purchase & hold the property on behalf of the SMSF. This is a legal requirement when an SMSF borrows money to purchase property, ensuring that the loan is secured only against the property itself and not other assets of the SMSF.
5. Nominate Trustees
Trustee Appointment: They appointed trustees for both the SMSF and the bare trust. These trustees are responsible for managing the fund and ensuring all decisions comply with superannuation laws and regulations.
6. Secure Financing
Mortgage Pre-Approval: Working with a mortgage broker, they obtained pre-approval for a limited recourse loan from a financial institution. This type of loan is specific to SMSFs, ensuring that only the purchased property is at risk, not the entire fund. They secured financing for 70% of the property’s value, leveraging their SMSF to maximize their investment potential.
With these preparations in place, the family was ready to embark on their property investment journey with Start2Invest, setting the stage for a successful and profitable addition to their superannuation portfolio.
Engagement with Start2Invest
At Start2Invest, we specialize in property investing with SMSFs, and many of our recent clients have successfully navigated this path with our help. Here’s how we guided our Sydney family through our streamlined 5-step process:
1. Free Consultation
Initial Call: We began with a 30-minute call to understand the family’s goals and objectives, their current situation, and background. This helped us identify how we could add value and map out a high-level plan with clear next steps for property investing with their SMSF.
2. Strategy Planning
Deep Dive: We conducted an in-depth analysis of the family’s financial situation and future plans. Their goal was to build wealth for retirement and create a legacy for their children and grandchildren. We developed a tailored strategy plan with a clear roadmap, steps, and milestones to achieve their property investing goals.
3. Location Research
Market Insights: We provided location recommendations based on long-term economic growth drivers in various cities, suburbs, and regions across Australia. Our research briefings helped the family understand broader market trends that could impact the value of their SMSF investment.
4. Property Sourcing & Evaluation
Sourcing: Leveraging our relationships with real estate agents and professional property sourcing tools, we explored potential investments in their chosen location. We included off-market and pre-market opportunities, evaluating properties against strict investment criteria, including amenities, lifestyle factors, transport, schools, and shopping. This ensured the property would attract quality tenants and minimize vacancy risks. We also considered comparable sales and future development opportunities to determine market value.
5. Negotiation & Purchase
Purchase Process: We streamlined the purchase process, from price negotiations and due diligence to settlement. Once the family chose a suitable property, Start2Invest negotiated on their behalf to secure the best deal quickly, outpacing competing offers. They acquired a large 4-bedroom, 2-bathroom freestanding house in a growing suburb of Perth, close to employment hubs, quality schools, lifestyle amenities, and transport.
Outcome
By guiding the family through these five steps, we helped them complete the acquisition within five weeks, securing a high-growth property that increased in value by $135,000 or 20% in just 11 months. They also secured a tenant within one week, with rent increasing by 10%, potentially adding $2,500 a year in additional cash flow. The family was delighted with their purchase and the results achieved through Start2Invest. Read more about their purchase on our results page.
Summary
Investing in property through your SMSF can be a highly effective way to grow your retirement savings. Our Sydney clients' experience demonstrates how, with the right guidance and strategy, you can successfully navigate the complexities of SMSF property investment to achieve substantial financial growth. From setting up the necessary structures to securing a profitable property, our streamlined process ensures a smooth and rewarding journey.
Disclaimer
This article is intended to provide general information only and does not constitute financial, tax, or legal advice. The case study presented is based on a specific client scenario and individual results may vary. We recommend seeking independent advice from qualified professionals to address your particular circumstances and ensure compliance with all relevant laws and regulations. Investing in property involves risks, and past performance is not indicative of future results. Always conduct thorough research and consider your financial position before making investment decisions.
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