The use of self-managed super funds (SMSF) to buy and own a property has been increasingly attracting many investors. While it is a great way to diversify your investment portfolio, there are things and terms you must understand.
There are indeed great benefits associated under this agreement, specifically when it comes to tax advantages. What comes after, however, might get a little complicated. This is why you must consider certain things before you take the leap:
You can't live in the property
You buy a property through self-managed super funds to support your investment goals. This is so you can fund your own retirement wealth. The property must give you profit in one way or another, and the only way to do that is to turn it into a business property.
The property should’t be your ONLY asset
Diversify your assets as much as possible. This is to secure your fund and avoid making risky moves. Generally, you need to have at least $200,000 before you can open your own SMSF and invest on anything.
Loans under this term are more complicated
With SMSF, taking out a loan to purchase a property isn't as simple as getting a normal mortgage for your home. You usually face hurdles along the way before you obtain an approval for your loan. Furthermore, most lenders are stricter when it comes to the total amount you can borrow. You are lucky if you find a lending company willing to give you more than 80% or even the full amount you need.
It is important to hear what professionals say about it. Since SMSF is complex, you need someone who knows the market from every angle. This is to understand how the industry works and what terms will benefit you the most.
Once you know these, it’ll be easier to maximise your SMSF.