Yes a new
concept in property has just arrived &
it is worth a serious look.
Only
recently we wrote of Peter being ‘sucked
in’ by using his existing home equity to be a deposit on a rental property
via an SMSF and all the responsibilities as trustee.
He simply
can’t afford that because he on an average wage with three young children &
hence his wife can’t work either. An innocent taken & now a problem for
Peter that he wants & needs solved.
The problem
we have is that there is a huge loan & the responsibilities of being a
trustee when Peter is & must take advice from the professionals who flogged
this concept to him.
We are very
aware as we have been offered & never taken the 25,000 for selling a new
house.
As Joe said
on launching the Intergenerational report ‘it is all about Values'.
Why isn’t
the new Labor Police minister looking a that??!?!
We were
introduced to this new concept at our recent Professional Development day.
What is
Fractional Property Investing?
It appears
to us to be a version of ‘crowd funding’.
I.e. You
& other investors who maybe your contacts decide to invest in a property
which maybe commercial or retail or residential or industrial.
There is an
ASIC approved book build process to facilitate the initial property purchase.
You choose
who will be your property adviser to advise on the initial property.
The
property is managed by independent accredited property managers who are paid out
of the gross rent. They arrange tenants, maintenance & rent collection.
As we are
all aware property is a larger sum than
many have. i.e. 500,000 to 1 million or many millions.
If you have
an asset allocation of even 20% in property then that is 100,000 & Peter
doesn’t have that. He does have that in house equity but then risks of
increasing rates or no tenants west of anywhere or loss of his income to meet
the negative cashflow is only casually mentioned.
His house equity can disappear in a very over
priced market & in his case over
valued property.
Remember at least 8% of all property is sold at a loss even
before the high costs of selling.
He should
not & can’t borrow because his family needs to live but he wants real
property & not listed REITS.
Yes he
could have his SMSF & invest in this without all the associated challenges
of borrowing within an SMSF. This eliminates the need for LRBA. How good is
that?
Property
interests may be acquired by a SMSF as it will be a widely held trust.
I.e. direct
property without borrowing.
The
solution is investing into a first ever segregated property trust where each
property is contained within a sub fund.
One of the
biggest drawbacks to unlisted or real property is it is NOT liquid. I you cannot
sell off the back steps if you have a sudden need for funds.
However
this concept has a secondary market of
other unit holders or other investors as it has ‘make a market’ Authorisations.
These sub
funds have 5 year terms & requires a 50% vote to renew.
At any time
unit holders can vote to wind up a fund & that requires a 75% agreement.
Then there
is all the outsourced due diligence & administration done on behalf of
investors. There is a simple end of year reporting process.
The fund is
low cost compared to the alternatives i.e. 0.8% on property & 0.2% on cash.
OK that is an
introduction to a new concept to property investing.
I.e. investing without the need for any borrowing & with
better liquidity without the risk attached to listed property trusts.
We comment that it is
not on our Dealer’s Approved List yet as it is so new. However if there is
enough national interest then it maybe.
If you want to know more then ‘you know what to do’ as a client’s voice mail says.
You
could check this vision out.
If we were to sit down in three years time & looked back what do we need to do today so that you are financially & personally better off & happier.
As Peter & others do call us on 07 3848 1088 or email us or visit our websites.
John McAuliffe
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