Mortgages, Money and Me

Self Managed Super and Property Investment

Is it right for you?

If you are considering the purchase of either residential or commercial property within a Self Managed Superannuation Fund (SMSF) then you will need to surround yourself with a team of professionals to ensure that each step is completed correctly as this type of investment is heavily regulated under Federal legislation.

However, for many people the benefits far outweigh the inconvenience as they can tap into equity previously quarantined from their property investment strategies. Also, lenders will assess the strength of the investment on its own merits, and providing the rent and any other income from the fund cover the loan repayments, and the property itself meets certain requirements, then an application for finance will be considered. This is particularly useful if income outside of Superannuation is committed elsewhere.

These are the people you will need to talk to prior to making an offer to purchase:

First of all, speak to your accountant and/or financial planner.

They will assess your needs to see if establishing a SMSF is appropriate to your circumstances, and whether property investment within that fund would meet your financial goals and requirements. They will also be able to help you set up a SMSF if you do not already have one.

If you are looking to borrow funds to assist with the property purchase it would also be appropriate at this stage to chat with your bank or mortgage broker to ascertain how much you could borrow within the fund. (Note that this is a service that we provide).

Then, once you have decided that property investment within the SMSF is right for you, speak to a lawyer to set up the correct trust structure for the property purchase. The property is controlled by a separate Property (or Bare) Trust to the Super Fund, with the Super Fund having beneficial ownership. There is a very specific way that this must be done to satisfy legislative requirements, and it is important to have the correct advice for this.

And then, once all this is in place you can go shopping! It is very important that you have the correct structure in place first as your purchase contract must be worded a certain way to correctly reflect the ownership of the property with consideration to the SMSF and the controlling Property Trust.

If all this is too much to take in, just remember… surround yourself with professionals, and they will help you!