For some years, self-managed super fund members have been
able to invest in residential property, as long as they follow strict
guidelines.
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.
“If it is, the next step is to set up the SMSF,” says Albert Waldron, a finance broker with Awesome Lending Solutions who has also recently
invested in a property through his own SMSF. “I recommend using the services of
a specialist. Do this before you start looking at an investment property to
buy.”
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.
“If you need a loan to buy the investment property, you will
need to establish a bare trust as that is what the lender lends the money to,”
Mitchell explains. “The purpose of this trust is to allow a limited recourse
borrowing arrangement (LRBA) to occur.”
This means, should you hit unexpected difficulties and be
unable to make repayments, your lender can only access the assets that the loan
is against.
One potential difficulty is that you have to have found the
property you want to purchase to be able to establish the loan.
“When purchasing, I highly recommend you set a longer than
normal finance approval period – a minimum of 21 days,” Waldron says.
What
can you buy?
There are two main, and fairly simple, rules of buying
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,” says Waldron.
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.
Thinking
of investing in property through an SMSF? Contact us now on 1300 761 988 or by going to our website www.awesomelendingsolutions.com.au
