Investing in property through an SMSF

For some years, self-managed super fund members have been able to invest in residential property, as long as they follow strict guidelines.

Unfortunately with changes to legislation, most lenders stopped offering mortgage products for SMSF which forced up the interest rates and complexity to be able to purchase. The good news is that things are changing and SMSF loans are coming back with lenders being super competitive in this space.

Investing through your SMSF is more complex and different from a normal investment loan, so if you've considered investing then the first step is to have a discussion with an expert to determine whether investing through an SMSF is the most appropriate approach to property investment given your personal circumstances.

If it is, the next step is to set up the SMSF and bare trust. We highly recommend talking to a specialist that understands property investing. This is a key step to do before looking at properties as costs and what you can buy are limited.

Another tip is to be aware that rolling over any existing super into a SMSF may take up to a month to process, so build in time for this to occur.

What can you buy?

There are two main, and fairly simple, rules of buying a residential investment property through SMSFs. Firstly, you and your relatives cannot live in the property and, secondly, you can maintain the property but cannot improve it.

The residential investment property can be a house, an apartment or townhouse, or any other type of property a non-SMSF investor might consider.

The maximum borrowing within an SMSF is normally 80 per cent of the property value (although some lenders will go to 90%) and it’s important to take into consideration that there is a cost to establishing and maintaining your SMSF, as well as subsequent fees and charges involved in the purchase of the investment property.

When purchasing, we highly recommend you set a longer than normal finance approval period – a minimum of 21 days.

If you need help or guidance through the process then we are more than happy to help. Contact us today.

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