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EFG Blog

PROPERTY & SELF MANAGED SUPER FUNDS

Raymond Pecotic - Monday, November 19, 2012

At Empire Financial Group, we have philosophically been advocates of investing in real estate where it suits the circumstances of the client (for example, age, equity position, income requirements, long term income vs capital growth, and cashflow).  Traditionally, financial advisors have steered clear of such recommendations, primarily because their remuneration methods have prevented them for being compensated for such advice. 

Those of you who have enjoyed a long term relationship with Empire will know the way we engage with clients means our advice is primarily strategic, rather than "product" or investment driven, and as such, property forms the basis of many conversations we have with clients.

This is highlighted by the fantastic relationships we enjoy with real estate agents and finance brokers.

Changes to the Self Managed Super Fund regulations have meant that people can now borrow to purchase real estate in their Self Managed Funds - and this may be one of the key reasons why Self Managed Super is enjoying such a spike in popularity.

Given our experience in this area, and our belief that real estate is an important part of an investment portfolio geared for growth, we have quite often, where it has been appropriate and beneficial to our clients, made recommendations to explore such structures and assisted clients in doing so.

And they are many reasons to do so! The strategy can have some great benefits - not least of all investing in real estate using an incredibly tax effective investment structure, that can result in reduced, or no, capital gains tax upon the sale of the property.  Tax deductible contributions can be used to pay off debt, where in a non-super environment this is not possible.  And by using bank funds to purchase assets, one can magnify their capital growth - and losses!

And this is the key - all the best prepared plans and structures will be worthless, and may end up costing you dearly, if you buy the wrong property.

Unfortunately, these changes in SMSF rules have brought the property spruikers out in force.  These properties are sold by people sprouting the virtues of real estate, but they are not usually licensed real estate agents. (In fact, in most states you do not have to be a licensed real estate salesperson to sell a brand new house and land package)  They talk about superannuation and retirement planning - yet they are unlikely to be licensed financial advisors.  And they base a large part of their sales process on tax benefits - yet are rarely Registered Tax Agents.

We have seen the headaches associated with people buying overpriced, spruiker driven properties with less than ideal investment characteristics - headaches that have cost people tens of thousands, and sometimes into the hundreds of thousands.

I feel the word "passionate" is at times overused.  However, if anybody has heard me speak on this subject, they will know just how passionate I can get about this.  However, rather than rant about this, I think a third party source can do my job for me, without the emotion - the attached article from The Australian sums up Empire's position perfectly.  

If you would like to discuss Self Managed Super Funds, or any other financial strategies, it's important to speak to somebody who will provide you an open minded approach, taking into consideration many choices and options.  Please call Empire Financial Group on (08) 9323 300, or contact us at this link -  www.efg.net.au/contact-us


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