Most experts agree that property in an essential investment within an appropriate investment portfolio. However, most people who have property investment do so through large property trusts. Unfortunately, as a result of the Global Financial Crisis (GFC) many of these investments were and in some cases are still frozen and accordingly investors cannot get access to their investment.
An alternative strategy is to invest in direct property. The main advantages of investing in direct property through your superannuation fund are:
- You can use part or all of your existing superannuation to finance the purchase of the property. That is, if you have $200,000 in superannuation fund you may consider purchasing an investment property within you superannuation fund for say $600,000 and borrow $400,000 to finance the acquisition. Alternatively,
If you were to purchase this property outside of your superannuation fund you may have to seek finance for the whole of the $600,000 unless you have surplus savings outside of superannuation.
- You can use your 9.5% superannuation and the net rent from the property to accelerate the repayment of the bank loan.
- You can potentially add to the value of the investment through repairs and renovations.
- You are able to service a higher gearing level on property then you are able to on shares.
- The interest rate of the funds borrowed to purchase an investment property are generally offered at a lower interest rate than if you borrowed money to purchase shares.
- Individual investors generally understand the property market better than they understand the share market.
For more information on purchasing an investment property using your superannuation, go to our Self Managed Super Funds page to read more, or feel free to read some of our SMSF blogs in our Financial Planning News section. Our published editorials on SMSFs can also be found in our Editorial Features section.
Quinn Financial Planning has the expertise to help you build your wealth. For more advice on investing in a Self Managed Super Fund, To ensure that your SMSF is structured and administered correctly please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
Disclaimer: The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.