So some of your friends have bought property with their Super money? Now you are keen to do it too. Here are the crucial issues you need to consider before buying a property through your Super:
1. It might not be right for you.
Setting up an SMSF can be costly and you usually need a minimum fund value before proceeding. If you aren’t planning to buy a property or invest directly in shares, this may not be the best option for you. Managed Funds via standard Industry funds or Retail funds e.g. MLC, BT, etc. may be the best option for you.
2. It’s not a set-and-forget type of thing.
Your SMSF needs to be audited annually and there are ongoing costs of running it. Be sure you understand these and have costed them.
3. It’s not The Block for Renovators
If you’ve ever thought the following: “I’ve seen every season of The Block. I’ll renovate properties with my Super and be rich!” then you shouldn’t be considering this strategy. You cannot buy a property and renovate it i.e. flipping. The SIS legislation around what is permitted is very strict.
4. You Super needs to be able to afford it.
If you are planning to use your Super to buy a property, you need to know your price point of property before proceeding. Ensure you have the loan approval and SMSF set up before committing to purchasing anything.
5. It’s not a get rich quick vehicle
Easy money- it ain’t! You can’t access the money or any profits early i.e. before retirement. Neither can you leverage the equity to buy more property. You can however sell the property within the Super (without tax on the profits) and buy more property or properties
6. You will need professional advice at every step.
Like DIY surgery, it’s possible to do it on yourself, but highly unadvisable. Your mortgage broker will likely be the most important person in the whole process. Ensure he/she has at least the basic accreditation and SMSF qualifications.
Most accountants are not qualified to advise you on SMSF strategies, this is the job of a qualified Financial Planner. Make sure your Financial Planner has an SMSF accreditation and isn’t biased in his advice against you doing it. The same applies to your mortgage broker.
7. You will usually need at least $150,000 in Super just to begin.
Given current property prices, having a Super balance of less than $150,000 may make it difficult (although not impossible) to buy a property through your Super. A couple may be able to join together their Super balances to achieve this, however.
8. SMSF (Super) loans are much more complicated than normal home loans.
Ensure you work with the right broker who knows his/her way around this. Don’t bother wasting your time in a bank branch. They haven’t got the experience, inclination, or panel of lenders to get you the best deal.
9. You should be asking questions.
Ask questions at every step. It is ultimately for your benefit and will be your retirement. So you have every right to ask as many questions as you like until you feel happy.
SMSFs are not for everyone and there are certainly not to be entered into lightly. However, for the shrewd property investor, they open up an entirely new world of possibility. To find out more or to discuss any items above further call us for free on +61 7 5456 2928 or email: [email protected]
