SMSF Returns Through Property Development

10 Dec 2012

Material supplied by SMSF Property Australia

Missed the free webinar? You can see a recording of the live event here 

The ATO’s acting commissioner Bruce Quigley recently expressed concern that Australians are investing in property with their SMSF without fully understanding their obligations.

The fact that Australian regulators are keeping their eyes on SMSF trustees investing in property shows the pressure created by the huge volume of money flowing away from shares and fixed assets and into property.

Quick market shifts, like the one currently happening with SMSF funds, often create a “gold rush” phase where people are advised poorly, or not at all, and money is invested and sometimes lost.

But, even as more and more SMSF investors rush to buy, the tightening credit market since the GFC has left builders often starved for credit – creating what could be seen as a perfect storm.

Looking to take advantage of this storm, SMSF investors have turned to the “crowd funding” model popularised by Kickstarter that allows them to use their SMSF in order to invest directly into Property Development, one project at a time. In this model, investors choose the developments they want to invest in, and fund managers help them further mitigate their risk by keeping the banks out of the equation.

SMSF Property Australia’s Marc Withnall says his firm came about to help SMSF investors take advantage of the super returns available through property development. “Every development has individual nuances that make it unique, some have more time risk that others and therefore also have a bigger chance of an upside depending on the market at completion, but the one thing that makes us different is that we don’t use banks,” he says.  

“Banks in projects tend to pull in opposite directions than the equity because debt has a different required outcome”, he adds. “At the moment we can earn sufficient return on investment without debt and our investors have made it very clear they want security and the least amount of risk as possible.”

Marc says a large number of the investors in these developments end up purchasing the product at the end. “It wasn’t really the original plan but we couldn’t help it if our investors wanted to buy what they were building”, he says. “That’s okay as it further reduces the risk.”

Marc and former CEO of ME Bank Anthony Wamsteker joined YIP for a free webinar. If you missed the live event you can still see a recording of it here

The above information is supplied by SMSF Property Australia.
Disclaimer: while due care is taken, the viewpoints expressed by sponsors
do not necessarily reflect the opinions of Your Investment Property.

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