Omniwealth thinks that investors in their 30s are the perfect age to purchase property within an SMSF. Leaving such a major investment decision until your mid to late 40s may not work for many investors and the lenders that are needed to make it all happen.
Investing in property through your SMSF in your 30s gives you plenty of time to maximise your investment potential because by the time you are ready to retire, the loan will either be paid off or the rental income will easily cover the repayments and still generate the fund a nice profit. It allows time to consider a second purchase a few years after the first, doubling the potential passive income the fund could generate upon retirement. It also gives you maximum property holding time, to progress through multiple property cycles and potentially receive maximum capital growth benefits.
Contributing to superannuation does not hurt personal cash flow or lending options (especially for PAYG employed), meaning you can still live a comfortable lifestyle while planning for your retirement. The younger the SMSF members are, the easier the loan approval is to obtain, provided you have sufficient liquid assets in the fund and are making sufficient contributions. The ability to obtain interest only loans allows you to take advantage of gearing up your SMSF, which is not offered to older clients. You also maximise the loan term (30 years) as no exit strategy is required because you can work until the maturity of the loan.
For a two-member fund, you can concessionally contribute $50,000 per annum into your SMSF. This means that it will not take long to have a sufficient balance to purchase a property.
In a lot of cases, by the time you are 40 you may have “missed the boat”. Most people are reactive when it comes to retirement planning. They are more likely to hit their late 40s before they think about how they will fund their retirement. If they were pro-active, they would consider this during their 30s so the realisation is not as harsh.
It’s a big decision at an early age as investors cannot redraw or cross collateralise an SMSF property. This means that you must contribute cash of at least 30% plus costs to any transaction in super. By making this decision and purchasing, it can put people in a position to build that balance up over a few years to afford a second property.
Early decisions like this can leave room for multiple investments by the time of retirement. The right strategy, the right circumstances and the right lender can make it possible.
Aaron Fuda
SMSF, Residential & Small Business Mortgage Broker
Omniwealth
T: 02 9112 4328
M: 0451 178 522
aaron.fuda@omniwealth.com.au
www.omniwealth.com.au