Generate $300k TAX FREE With Your Super | Real Estate SMSF Investing

Summary

In this video, Ravi Sharma explores the benefits of using a super fund to build wealth through real estate, particularly in light of recent stock market volatility. He explains how individuals can leverage their super funds to buy property, offering a strategy to potentially earn substantial, tax-free income by retirement. Through real-life examples, Sharma illustrates how smart property investment can lead to significant asset growth, higher rental income, and a safer retirement plan. He emphasizes the importance of understanding taxes and the right team to execute such a strategy effectively.

Takeaways

• 😀 Super funds provide a unique opportunity to leverage property investments and grow wealth without affecting personal borrowing capacity.
• 😀 The tax advantages of using your super fund for property investments are significant: rental income is taxed at only 15%, and after retirement, it’s tax-free.
• 😀 By using your super fund to buy property, you can earn a higher return compared to traditional investments like stocks, especially with real estate's capital growth and rental income.
• 😀 Property values typically grow at a conservative rate of 5-8% annually, but even with conservative estimates, your super fund property portfolio can grow significantly over time.
• 😀 Starting in your 40s or 50s and investing in real estate through your super fund can result in a portfolio worth millions by the time you retire, generating substantial passive income.
• 😀 It’s important to plan ahead and choose the right properties in the right areas to ensure long-term growth and strong rental yields for retirement.
• 😀 You can’t leverage equity in your super fund to buy additional properties, so it’s crucial to diversify investments across different assets from the start.
• 😀 After 10 years of investing, it’s possible to sell some properties, reinvest the proceeds, and supercharge your portfolio for even higher returns in the future.
• 😀 With strategic investing and the right planning, you can accumulate substantial wealth, possibly even paying off your principal place of residence and living comfortably off passive income during retirement.
• 😀 Understanding tax rates and leveraging the tax benefits of your super fund is crucial to maximizing returns, especially since superannuation offers significantly lower tax rates compared to personal investments.

Q & A

How can building wealth with real estate be easier than most people think?

Building wealth with real estate can be easier if you understand how the tax system works and use strategies like leveraging your super fund to purchase property. This allows you to earn significant returns while taking advantage of tax benefits, especially in the long term.

What is the advantage of investing in property through your super fund instead of personal savings?

Investing through your super fund offers tax advantages, as income generated is taxed at a maximum rate of 15%. This is much lower than the tax rates applied to personal income, which can be as high as 47%. Furthermore, super funds provide a more structured investment vehicle for retirement planning.

What deposit is typically required to buy property within a super fund?

Typically, a 20% deposit is required to buy property within a super fund. In some cases, it may be possible to use a 10% deposit, depending on the deal and the broker’s expertise.

Can you use equity from one property to buy additional properties within your super fund?

No, unlike personal investments where equity from one property can be used as a deposit for another, you cannot leverage equity from a property in your super fund to buy additional properties. This limitation requires careful planning and the selection of properties that offer strong capital growth and cash flow.

What is the potential risk of not selecting the right properties when investing in real estate through your super fund?

If the right properties are not selected, you may not experience the expected growth in value or rental income. This can leave you with insufficient returns or hinder the overall effectiveness of your investment strategy, especially in retirement.

How can real estate investments in a super fund help someone generate tax-free income during retirement?

Once you retire, the income generated from properties held within your super fund is tax-free. This allows you to potentially earn substantial passive income without the burden of taxes, providing a higher net income compared to traditional investments.

What is the significance of having liquidity in your super fund when buying property?

Liquidity is essential because some banks and lending institutions require a liquidity buffer, meaning you must have additional funds in your super account beyond the property purchase itself. Without this buffer, loans may not be approved.

How did the example of Kevin and Anna illustrate the power of property investment within a super fund?

Kevin and Anna, in their 40s, used $300,000 to purchase two properties. After 20 years, their portfolio appreciated to $2.5 million, generating over $100,000 annually in rental income. This demonstrates how leveraging a super fund for property investment can yield substantial returns over time.

What are the expected returns after 10 years for someone investing in property through their super fund?

After 10 years, an investment portfolio in real estate could appreciate significantly. For example, Kevin and Anna’s portfolio valued at $1.5 million after 10 years, could be sold for equity, providing opportunities to reinvest and continue growing their wealth.

Why is it important to have the right team when executing a real estate investment strategy through a super fund?

Having the right team—such as brokers, accountants, and buyer agents—is crucial because a mistake in setting up or executing the strategy can jeopardize the entire plan. Proper guidance ensures that the process is executed correctly, especially considering tax implications and the complexity of super fund regulations.