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Smart Property

How to Invest Your Self-Managed Super Funds in Property

Smart Property

By Smart Property


Self-managed super funds (SMSFs) is one of the ways Australians can save for their retirement. The one major difference between SMSFs and other types of retirement funds is that SMSF members are also the trustees of the fund. In short, the members themselves actually run it for their own benefit, but must comply with specific super and tax laws. According to the Property Investing Australia Group, it is possible to purchase property with an SMSF, but the member must adhere to SMSF property rules.


1.     Consider the Rules before Using Super to Buy Investment Property


As mentioned earlier, there are smsf property investing rules that members must adhere to and should be considered to help them to determine whether or not a SMSF is the right thing for them. For example, if you were to use your super to purchase an investment property, it must not be lived in by a fund member or any other fund members’ related parties. Check out the Australian Taxation Office’s website on self-managed super funds to get a better understanding of the rules and regulations.


2.     Understand All of the Costs First


The costs involved are an important thing to consider when buying property through SMSF. In general, SMSF property sales tend to have a lot of fees and charges; consequently, the fees do add up and will reduce the balance of your super.


Understand all of the costs involved before signing up including the following:


·        Upfront fees

·        Legal Fees

·        Consultations Fees

·        Stamp duty

·        Any Ongoing property management fees     

·        Finance and/or Bank fees


Having a sound investment strategy will ensure that you get off on the right track right from the start.


3.     A Note on Borrowing


Borrowing is a possibility, but much like other aspects of SMSF property investing, there are rules. Borrowing can only be done under very strict circumstances called a “limited recourse borrowing arrangement”. With this strict borrowing option, there are risks involved.


These risks can include:


·        Higher cost – SMSF property loans are usually more expensive.

·        Difficult to cancel – If your contract has not been properly set up, you may not be able to unwind this arrangement, which could cause potential losses to your SMSF.

·        Property Alterations Are Not Allowed – Until the loan is paid off, no changes can be made to the property if they change the property’s character in any way.

·        Possible Tax Losses

·        Cash Flow – Payments are to be made from your SMSF which means your fund must always have sufficient liquidity and cash flow to make the payments.


When buying property through smsf you must always consider the risks involved.sthash.6cqpNWac.dpuf
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