Astute Investment Strategy for SMSF and Property Investment
SMSF Property Strategy
Cash Flow
We know that a SMSF can only be taxed at a maximum of 15%, the same applies to any deductions in your SMSF for the investment property. Meaning you can only deduct expenses incurred against the investment property up to 15%.
The result for your SMSF (depending on how much you leverage), in all likelihood will be 'Negative Cash Flow.'
The lower the yield, the more your SMSF would have to pay into the investment, eating into cash reserves in your SMSF, ultimately affecting your end retirement cash benefit. A strategy that is Negative Geared means you are relying heavily on Capital Growth. A riskier strategy in a SMSF.
If your SMSF pays cash for the property, the purpose might be to improve your cash flow and return on investment. If this is so, then again, a higher yielding investment property would make sound investment sense, for the purpose of increasing your income from the SMSF.
How to overcome this?
A SMSF investment strategy requires high yield investment grade properties for several reasons amongst them being :
- Higher Rental Income improves your cash flow in the SMSF
- Allows the SMSF to pay down the loan faster with the higher income received
- Your end retirement benefit will be higher, allowing you to live the life you deserve and want for yourself, having access to more income / cash
- It this makes investment sense to invest in an Investment Grade property which has both Capital Growth Potential + Higher Rental Income
