Since 2007, guidelines surrounding superfund policies have changed, allowing you to invest your superfund money into property. Instead of purchasing the property outright, you can now borrow 60 to 75 per cent of the property’s value from your SMSF.
If you are interested in tax benefits, you will also receive them as an extra perk along with growing your assets.
What Property Types Can You Purchase?
As you will be purchasing an asset, you can buy just about any type of property that you are interested in. This includes residential, commercial, retail and rural properties, along with land – even holiday apartments.
However, since the goal of purchasing this property is for investment, you are not allowed to move into the property to live. If you are thinking about changing homes, you will not be able to borrow money from your SMSF.
What’s The Process?
If you are going to purchase property by borrowing from your SMSF, you will have to go over the process with your lawyer and financial advisor to make sure that it’s appropriate for your circumstances.
The following is a basic overview of what is required throughout the process:
• A lawyer creates a property trust on your behalf.
• Once you find the property in question, you place a deposit on and borrow anywhere from 60 to 75 per cent (or less) from your SMSF.
• The property trustee officially purchases the property and become the premise’s legal owner.
• You give a property mortgage to the lender of your SMSF and any rent that is received for your property is deposited directly into the SMSF, allowing you to pay off the loan.
• Ultimately, the only entity that benefits from your new asset is your SMSF fund.
What do You Need to Invest in Property?
When you decide to borrow money from your SMSF for property investment, you should take the following four factors into account:
• You need to be able to pay back your loan, so ensure there is enough money for repayments.
• Not all SMSFs allow borrowing for property assets, so make sure that yours does before beginning the process.
• Make sure that investing in property is a part of your investment strategy and that your SMSF will benefit from such a decision.
• Sometimes there are additional costs which you must also be able to cover such as legal fees, lender’s fees, taxes, interest, accounting fees and insurance.
If property investment sounds like a good investment strategy for you, then you may want to talk to your financial advisors so that you can make the best choice.