Average Australian Mortgage Size in 2023
29 Nov 2023
A self-managed superannuation fund (SMSF) is a great way to have control over your retirement savings. With an SMSF, you’ll have the flexibility to invest your superannuation in projects that you think are lucrative and worthwhile.
One of the most popular SMSF investment strategies is purchasing real estate. Buying investment properties through SMSF loans can offer great advantages, but the process can be complicated.
Make the most out of your SMSF and create the best SMSF strategy by being well-informed. Here are important things you should know about SMSF property investment:
With an SMSF, you can purchase a property without putting money aside or spending out of your own accounts. Take note, when using your SMSF to purchase property, you must follow certain rules and guidelines made by the Australian Tax Office (ATO). The property you purchase must:
Commercial properties purchased through an SMSF can be leased to fund members for their business as long as they follow ATO rules. Be aware of these rules before purchasing an investment property with an SMSF loan.
Here are some key advantages of using an SMSF to purchase an investment property:
Investing in property may provide high returns with minimal risk. Real estate may offer increasing capital growth and rental income. It’s incredibly advantageous especially since you won’t be able to benefit from your investment until you’ve retired.
A lot of people aren’t aware that they can use an SMSF loan to buy their investment properties. This means fund members can have a wider selection of property because their budget isn’t as restricted. With an SMSF loan, fund members aren’t limited to the funds they have right now and can build a better investment strategy.
If you’re going to take out an SMSF loan, your superannuation contributions will contribute to paying for that loan. You’re using a portion of your pre-taxed salary to pay for the SMSF loan which is also a great plus.
Properties bought through an SMSF loan can enjoy great tax benefits such as:
As you can see, there’s no shortage of tax incentives when you use your SMSF to buy property. These tax advantages are one of the top reasons why a lot of people want to use their SMSF for real estate. Tax arrangements with SMSFs can be complex, and you should always get expert advice.
Earn money from your SMSF property investment and have a home to call yours once it’s time to retire. You can invest in a residential property and rent it out in the meantime. When it’s time to retire, you can buy the property from your superfund and make it your retirement residence.
You can use your SMSF to invest in different types of properties from commercial to residential. This allows you to branch out more and maximise your SMSF while diversifying your asset portfolio. Think about your goals and figure out what best suits your needs when using your SMSF for property investment.
This is a great boon for business owners. If you purchase a commercial property through an SMSF loan, you can rent it out to your business. The market-rate rental payment to your SMSF can be deducted from your company’s gross revenue. No more landlords or worrying about rent.
Like with any type of investment, there are some drawbacks to SMSF property investments you need to be aware of.
Using your SMSF to purchase your investment property means abiding by strict rules set by the ATO. This includes restrictions on what type of property you can buy, and what the property is used for.
Buying a property through an SMSF means it isn’t directly owned by you. Selling that asset will be more complicated, may take longer, and could cost you more. The price of your property may also depreciate depending on market factors.
Investing in property through an SMSF can be expensive with costs such as stamp duty, operational expenses, legal fees, and the like. Your superannuation fund needs to have a significant amount or it may not be feasible to purchase a property through your SMSF. See what type of SMSF loans are available to you and best fit your financial situation.
Lenders may require a higher initial deposit and personal guarantees if you take out an SMSF loan. Additional documents may also be required to ensure that you’ll make your loan repayments through your SMSF.
An SMSF property investment may sound exciting and profitable—and for some it is—but you need to make sure you’re making a knowledgeable and strategic decision. Your superannuation fund is nothing to play around with after all. Before you start investing, here are some essential tips:
As you may have noticed, SMSFs can be tricky to navigate with so many rules and regulations to follow. If you want to handle your SMSF property investment with ease and efficiency, getting an SMSF specialist or a financial advisor is a good idea. In fact, many lenders even require borrowers to seek out independent legal and/or financial advice to complete the loan application.
With the help of a professional, you’ll have someone guiding you through the process. You’ll know all the risks and rewards of your potential investment and how to best achieve your retirement goals.
Look at the cash flow and repayment capacity of your SMSF. This is an important step to ensure you’re able to pay for the investment property you want to buy. Consider expenses like loan repayments, ongoing costs, and the like to make sure you’re making a sound investment.
The SMSF loan you choose can make or break your property investment. Finding the right one is crucial for a successful SMSF property investment. The ideal SMSF loan has low rates and minimal to no ongoing fees so you can maximise your superannuation fund.
Speak with one of our friendly lending specialists today so you can know more about our SMSF loan. Book an appointment or call now!
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.