Harness cash flow. Create wealth.

it’s hard for younger people to think about using and investing in superannuation. 

 

While in the accumulation phase of life, when you really need all your money to buy stuff you need.

Studies show that people who can withhold instant gratification for the future are more financially successful.

This bodes well for super investing.

According to these guys, the GenX and Gen Y understand this better than the typical baby boomers.

Despite the tighter policy controls around SMSF lending and some banks exiting the space altogether, one mid-tier firm is continuing to see a lot of interest in property investment from younger SMSF trustees.

Newcastle Pitcher Partners managing partner Michael Minter said while the SMSF lending space has faced much tighter lending controls this year, particularly following the Royal Commission, the idea of using super to buy property within a super fund remains appealing to SMSFs from generation X and Y.

While there are important risks to consider, Mr Minter said younger SMSF trustees are still attracted to holding property in super for some of the benefits associated with it including a lower tax rate on SMSF income, a lower capital gain tax rate and tax deductions such as insurance premiums.

Mr Minter said there are two main types of generation X and Y investors.

“The first is the business owner who currently paid rent, but would prefer to buy a property, and have the rent paid into their super fund. The second wants to build their super balance through strategic property investments by borrowing and gearing,” he said.

He warned that there are important considerations that need to be made before undertaking property investments in super or an SMSF, however.

Practitioners, for example, he said, need to review their client’s financial goals current financial situation and tax obligations.

“Compare their current super fund against running an SMSF. Investment carries risk and the client must decide what level of risk you are comfortable with,” he said.

He also noted that $200,000 is the preferable amount to start an SMSF.

“Before making any property investment, the client should establish a set of investment criteria that they are comfortable with, including whether it’s residential or commercial, local or elsewhere or big or a mix of smaller properties. But whichever approach you adopt, research the options and the market thoroughly,” he said.

 

Click here for follow up call with Jerry about property investing and SMSF.

 

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