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. If you already have a SMSF property then now is a great time to refinance as rates have dropped!
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. This is normally done via a Financial Planner who understands real estate investing. We highly recommend talking with Plandd Financial who can offer advice and guidance.
If it is, the next step is to set up the SMSF and bare trust, which your Financial Planner or Accountant can help you with. 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 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. We highly recommend you seek help and guidance when purchasing and setting up a SMSF due to the complexities and costs. Both Lendd and Plandd Financial are here to offer advice if you need it.
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