Using self-managed superannuation funds (SMSF), it is now possible for property investors to use limited recourse borrowing (LRBA) to finance off-the-plan investments.
The strategy involves a person’s SMSF receiving rent that is concessionally taxed. This money is paid towards the loan while the person continues to work with the property then transferred to the individual upon their retirement.
Following retirement, the individual has a choice to either:
Australian housing is at the bottom of the market, according to the latest RP Data figures, which show that the threat of large falls in value is now in the past in most markets.
RP Data senior research manager Cameron Kusher, said stable market conditions, due to expectations of low interest rates over the medium term, were creating the right environment for a recovery.
The Australian Taxation Office is warning trustees of the rapidly growing self-managed superannuation funds (SMSF) sector to be cautious with real estate investment.
Even though the rules on SMSFs investing in property have been relaxed during the past five years, the Tax Office is warning trustees to know and comply with the laws.
According to the experts, financial mistakes such as these can turn a perfectly positioned investment property into a nightmare:
- Going directly to a bank rather than through an investment-savvy finance broker.
- Not having a financial buffer for unexpected repairs, vacancies and inevitable interest rate rises.
- Choosing a loan based on the interest rate only.
Half of all property investors hand over the entire management of their rental properties to a real estate agent, according to a survey of investors by consultants BDRC Jones Donald.
The survey also found that three quarters of all landlords surveyed involved a property manager in some aspect of their rental portfolio and tenant management, with less than a quarter self-managing their property investments and tenants.
Newcastle and the Hunter Valley have been identified among the nation’s top regions for property investment by a panel of industry experts.
Property magazine, Smart Property Investment, has published its annual fast 50 suburbs ranking and Newcastle, Cessnock and the Hunter Valley ranked among the top investment locations.
Units are proving a better property investment than houses, with unit prices growing 1.1% more than house prices annually for the past five years.
Property researcher RP Data shows that while capital city unit prices grew by an annual average return of 2.9 per cent over the five years to December 31 last year, house prices grew by only 1.8 per cent.
Lenders are returning to the days of 100% and above home financing, but with the proviso that parents with equity in their homes act as guarantors.
A 100% loan called the Get Ahead Start Home Loan is being offered by SGE Credit Union and is said to be the first time in three years that a lender has prominently offered loans with no deposit required.
Perth’s rental market has shown signs of easing towards the end of 2012, according to data from the Real Estate Institute of Western Australia.
It had the December quarter vacancy rate edging marginally higher from 1.8% to 1.9%. REIWA president, David Airey suggested it was accompanied by an easing in the climb in rents over the previous year.
Buyers turned out in force over the weekend delivering a strong result to the first test of the pre-Easter season.
Agents and buyer advocates cited low interest rates and pent-up demand as some of the factors drawing buyers back into the market after two years of lacklustre results and falling prices.