We sold our SMSF Investment Property AND here are the numbers – the good, the BAD and the ugly.

As I write this post I am also working through all the numbers from when we purchased the property in 2015, to now selling it and changing strategy.

I have battled with myself as to WHY I am changing direction when only 5 years have passed. I will walk through it here to work through the potential demons/concerns I have and see if I can come to some key points that will make this choice solidify in my mind. I don’t want to be thinking about this in years to come and wondering if I did the right thing or not.

Writing the reasons now will cast them in stone for me to look back on later if I do start down the rabbit hole of WHY did I SELL … Blah blah blah

Reasons to sell:

  • Heavily invested in property – both inside and outside of our retirement fund. We only have 5% of assets in shares overall at the moment.
  • The return on investment was minimal. It was very close to being neutrally geared when you only took into account the rent $515 per week to the loan of $209 per week. Even though the rent was enough for the loan interest, all other expenses took a huge amount so that we were neutrally geared most of the time. Our employer contributions were also needed to pay the principal of the loan and repairs to the property.
  • With the intention of retiring at 60, that leaves us only 8-9 years left to compound and accumulate. It is extremely difficult to obtain home loans with less than 60% LVR (Loan-to-Value Ratio), and our cash in the super fund was less than 10k at any given time. I could not see how we would be able to purchase 2 more properties AND pay them off before we retired. 3 properties at today’s market of approximately $500 per week each would give us a passive income of gross $78,000 pa. Our aim is $120,000 pa from our super fund. I just couldn’t see how the numbers would work for this target.
  • Having the property interstate meant we heavily relied on good trade people and real estate inspections to ensure the upkeep. This can be costly as you can’t do part of it yourself OR make sure that the property is maintained well. Even teeing up an inspection when we were up there one time was a pain and we still couldn’t get in due to some issues with the locks!

If we had started in our 30’s and if we had steady jobs with employer contributions perhaps it would be a different story as the flow of payments would be solid. Employer contributions have been erratic for my husband as he worked for various small companies that dragged out their super payments. The last 9 months both my husband and I have had no employer contributions as we have both been on government support JobKeeper at one time or another which put a huge strain on the way this portfolio was structured.

At the end of the day, no matter what reasoning, my sanity and my mental health are more important. There are other ways to make our retirement fund surge and with the FIRE community giving so much energy the money being broken down into ‘units’ in shares will be a hell of a lot easier to manage than the big elephant a house is.

Teenagers saving breakdown

The above shows about a 1.6% yearly return on the appreciation of the investment.

NOW for the overall increase in the super fund … (this I am scared about as my gut is telling me we went backwards).

SMSF actual balances

AND yep … backwards. Potentially if I had left the super funds going as they were we could have been $88k better off. Now you may wonder why would I try to work this out. I am estimating these numbers but working conservatively I think. If anyone is out there who sees some holes in my numbers please let me know! 😊

I do this so that I don’t have to think about this anymore. It’s done. I know the rough number now and I won’t wonder about it every so often when I recall the project. It was a learning experience and may have worked out and may still work out if we had stuck to it. We made the choice to change direction and with that choice we need to own the result.

This information will only make me work harder to focus on making the money that has accumulated work as hard as possible. I will keep massaging and working our numbers to ensure I capture every possible avenue to build this super fund to $1.8M by 2028/29. This will give me an estimated passive income of $100,000 per year. The balance of our estate will be from our investment property/ PPOR of about $1.4 – $1.6M. Not sure how we will stretch to a total of $5m but that number is still on the table as our overall networth target.

In the new year, I will go through what is the next steps for the $350,000 that is in our super fund.

Watch this space.

Would love to hear from you! Your thoughts, your questions, or what you are doing to make your superannuation work harder for you.