There are numerous benefits of using a Self-Managed Super Fund (SMSF) to purchase Real Estate.
Benefits of purchasing property with your SMSF
Your SMSF can purchase residential or commercial property worth more than its available funds through the benefits of gearing, and your SMSF will receive all income and capital growth even if the property has not been paid off.
Your SMSF can also use income from the property to help pay off the loan and there are tax benefits too. (It is always wise to consult your accountant).
Establishing your SMSF
If you’re considering this strategy, it’s important that you first establish your SMSF – it can’t be done in retrospect and the value of the SMSF portfolio will determine your purchasing and borrowing power.
Most importantly, when your SMSF is set up, the Trust Deed needs to give the Superannuation Fund Trustee power to:
- Purchase real estate,
- Borrow finance, and
- Secure the repayment of borrowed money.
A good way to grow retirement income
Because the single objective of your SMSF is to secure funds for your retirement, there are strict rules regarding property purchase and these are detailed in the Superannuation Industry Supervision Act 1993 (SIS Act).
Because the process of purchasing through an SMSF is more complicated than the usual property investment or home purchase, it’s wise to engage the services of a professional mortgage broker to steer you through it.
You also need to be aware that once you have set up your SMSF, you’re effectively in charge of it. This means a lot more flexibility and control over your investment decisions, but it comes with reporting responsibilities too, so understand what you’re doing and get professional advice.
At Simplify Finance, we have an experienced team who can answer any questions you may have. Usually, once your SMSF is established, we recommend applying for a loan and obtaining ‘pre-approval’ so that you’re ready to purchase when the time comes.