How To Develop Property In Your SMSF
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Transcript of How To Develop Property In Your SMSF
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“How To Develop Property In Your SMSF, With Lower Risk”
A crowd funded property development model that allows you to invest as little as $5,000 (or as much as $500,000).
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Introducing...
An innovative way for property investors to enjoy the upside potential of property
development, while eliminating some of the most serious risks...and without getting your
boots dirty!
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Meet Your Hosts
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What You’ll Discover In The Next 45 Minutes
1. Why the traditional property development model is broken
2. The crowd-funded property-development model explained
3. The numbers behind a current project (targeting 46% profit over 24 mths)
4. Simulation: “What would happen if GFC2 hit tomorrow?”
5. How to find out more
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Why Property Development?
PROS● Strong record of historical growth in Australia● A tangible “manufacturing” business● Adding value dramatically boosts profit potential● Faster “cash out” period than direct property
CONS● Complexity● “Manufacturing risk”● Bank has significant control● Significant capital required
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Why The Traditional Property Development Model Is Broken
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TotalDelivery Costs(TDC)
Available profit
75%
25%
Market Value = $100
$25
$25
$25
$25
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TotalDelivery Costs(TDC)
Available profit
Market Value = $100
$25
$25
$25
$25
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TotalDelivery Costs(TDC)
Available profit
Market Value = $100
Equity invested$25
$25
$25
$25
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TotalDelivery Costs(TDC)
Available profit
Market Value = $100
Equity invested$25
$25
$25
$25
Equation: $25 Profit from$25 Invested =
100% Return
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TotalDelivery Costs(TDC)
Available profit
Market Value = $100Equity invested by investors
$25
$25
$25
$25
Equation = $25 Profit from $75 Invested = 33% Return
Okay, but not WOW
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How With-Debt and Zero-Debt Development Returns Compare
Equity Profit ROI
With-Debt Development
$25 $25 100%
Zero-Debt Development
$75 $25 33%
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So… why “zero-debt”?Banks no longer monopolise lending
… eliminating the risk of the bank taking over the asset
AND
… increasing “sleep at night” factor
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Market Volatility: How it Affects Traditional Property Development
Revenue liquidity dries up bank claims asset
Karthikeyan Thangaraj, R. & Chank, TK (2012) “The effects of the global financial crisis on the Australian building construction supply chain” Construction, Economics & Building, 12 (3), 16-30.
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< 1.8 = below “imminent failure” threshold
Karthikeyan Thangaraj, R. & Chank, TK (2012) “The effects of the global financial crisis on the Australian building construction supply chain” Construction, Economics & Building, 12 (3), 16-30.
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With debt, banks retain ultimate control of the asset
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Our Model In A Nutshell
1. Find opportunity
2. Raise capital
3. Minimise costsi. cost of partsii. cost of assemblyiii. cost of selling
4. Sell the finished product
5. Distribute profits to the investors
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3 Ways We Manage The Downsides of Property Development...
1. Eliminate debt and remove banks from the equation
2. Minimise conflict to reduce waste
3. Provide a simpler, more transparent way to invest
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Traditional Property Development Is All Too Often Marred By Conflict
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Simple and Transparent
1. Investments start at $5K
2. Invest inside or outside SMSF
3. Keep up-to-date online... or visit us on site
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An Actual Project - Bryna Parade, Oxenford QLD
* All numbers based on project feasibility only - please contact us for a full Product Disclosure Statement
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Key Facts About Bryna Parade,Oxenford, Gold Coast
“South east Queensland is my top pick of everywhere to buy in Australasia at the moment… I’d be hard pushed to find anywhere better to invest in the next 3-5 years for capital growth.”
- John McGrath, CEO of McGrath Estate Agents
● 58, 2- and 3-storey townhouses.
● Minimum investment $5,000 (avg. $50K, Max. $500K)
● Targeting 45.98% profit over 24 months
● Suitable for SMSF or non-SMSF investment
● Currently ~48 hours away from maximum capital allocation
● Participate in the upsides of property development with reduced risks and downsides
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PLUS… Earn 8.65% On Your Invested FundsUntil The Project Commences!
Some conditions apply - please refer to information website for full details
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What would happen if GFC2 hit?With debt? And without debt?
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Num
ber o
f tra
nsac
tions
Transaction amount
Understanding Average House Price
$150,000 $10,000,000
Pre-GFC average house price in Australia
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Num
ber o
f tra
nsac
tions
Transaction amount
Understanding Average House Price
$150,000 $10,000,000
Pre-GFC average house price in Australia
The average price actually went up after the GFC but the top end collapsed.
This means that the dwellings below the average went up very significantly on the back of the government stimulation.
Post GFC average house price in Australia
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Assuming: ● Our current projected profits and IRR for Bryna Parade over 24 months ● 24 month delay (development takes twice as long as projected)
Worst-case scenario: what could happen to your investment in a zero-debt model?
Investment amount
24 months 36 mths 48 mths
Projected Profit
Projected IRR Projected Profit
Projected IRR Projected Profit
Projected IRR
$100,00045.98% 19.90% 45.98% 13.26%* 45.98% 9.95%*
$145,980 $145,980 $145,980
*These are approximations only - not all costs have been considered in this outcome - for example, the Funds Manager charges an annual fee which has not been included in the 36 month and 48 month example.
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Worst-case scenario: what could happen to your investment in a leveraged model?
● Bank claims the asset
● No development and no returns for investors
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The Tradeoff
Returns may not be the same as a leveraged property development model…
BUT
“Sleep at night” factor is higher…
AND
45.98% over 24 months is significantly better than ~2% on cash in the bank
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Development Income Fund(Open for Expressions of Interest)
- no unit price growth- targeting 7.5% p.a. (paid monthly)- suitable for most entities including SMSFs- minimum investment $20,000- 24 month term
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● Development cost (in millions) versus time (in months).
● This is a simplified, typical, single staged, small townhouse SPV development.
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Typical Staged Development
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Find Out More And Request an Invitation to Invest in Bryna Or express interest in our Development Income Fund.
Make a time: www.booknow.so/SMSFPropertyTeamemail: [email protected]
Invest online: http://www.smsfproperty.net.au/invest-online/
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Investor Comment - Brett Rix“SMSF Property Capital provides the opportunity to directly invest in property development - an activity that is beyond the reach of most investors who do not have the time or skills to project management their own construction sites.
SMSF Property Capital make you feel like a part owner in an actual business. They drag you through the mud on site,share with you the frustration of local government behaviour,and take you through the journey of design, construction andsales.
The potential returns are strong with a lot of downsideprotection.”
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Find Out More And Request an Invitation to Invest in Bryna Or express interest in our Development Income Fund.
Make a time: www.booknow.so/SMSFPropertyTeamemail: [email protected]
Invest online: http://www.smsfproperty.net.au/invest-online/
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Q&A Timeor make a time: www.booknow.
so/SMSFPropertyTeam
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Find Out More And Request an Invitation to Invest in Bryna Or express interest in our Development Income Fund.
Make a time: www.booknow.so/SMSFPropertyTeamemail: [email protected]
Invest online: http://www.smsfproperty.net.au/invest-online/