Buying an investment property through a self-managed super fund

Buying an investment property through a self-managed super fund (SMSF)

If you are thinking about buying an investment property with your superannuation savings you may be finding it difficult to get answers to some pretty basic questions:

  • Have you got enough super savings to set up your own fund?
  • Can you borrow through your SMSF to buy property?
  • How much can you borrow?
  • What sort of property can you buy – residential, commercial, a holiday home?
  • What happens to the property when you retire?
Where can you go for help?
Over 800,000 Australians are currently members of a self-managed super fund (SMSF).

Australians who have opted to take control of their own superannuation are often interested in including property in their self-managed superannuation fund portfolios.

However, direct property investing requires access to substantial sums of money and it was only in September 2007 that the Commonwealth government gave self-managed super funds the green light to purchase property and other assets with borrowings. While SMSFs always had the option of purchasing property with cash, by adding borrowings to the mix, entry to the property market was made considerably easier for more people.

The new laws have only been in place for just over three years and there have already been modifications, with further changes predicted. Despite this uncertainty there has so far been strong interest from trustees of existing SMSFs and other investors looking to set up SMSFs in order to use their retirement savings to invest in property. Research shows an estimated 40% more SMSFs are forecast to borrow money in the coming year (2011).

While it is hard to determine exactly how many people have started a DIY fund as a result of the legislation, what we can ascertain is that the number of funds being created has continued to grow in recent years.

And interestingly enough, not all of these superannuants conform with the traditional SMSF member profile – sophisticated investors, typically professionals, small business owners but not exclusively so, looking for additional flexibility and control over their super savings.

Instead, many are property investors looking to invest in property via SMSFs and many are people who previously would never have contemplated managing their own fund.
However, what they and many others are discovering is that not only is super an excellent vehicle for accumulating wealth and saving for retirement but that purchasing property via super brings with it considerable tax advantages.
Martin Murden is a Melbourne SMSF expert. He claims: “In the 39 years that I have been working with clients on their tax and superannuation, I have never seen such an interest in new legislation.”
As with all new things comes a learning curve. So, he has written a new book in easy-to-understand, plain English:
How to Invest in Property Through Your Self Managed Super Fund.
He hopes this book will play some part in an investor’s self-education as they decide whether investing in property through self-managed super is the right path for them and seek answers to the frequently asked questions listed at the start of this article.
Superannuation is an excellent vehicle for accumulating wealth for retirement and Australians have had a long-standing love affair with property. By combining the two, many think they have achieved a match made in heaven. But you need to have all the facts and all the answers to the frequently asked questions.
How to Invest in Property Through Your Self Managed Super Fund, by Martin Murden (Major Street Publishing 2011) is available from all good bookstores or direct from the publisher:
The above information is supplied by Major Street Publishing.
Disclaimer: while due care is taken, the viewpoints expressed by sponsors do not necessarily reflect the opinions of Your Investment Property.

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