SMSF and investing in property
Establishing a SMSF to purchase an investment property has become a very popular strategy. However, some of the finer details associated with the acquisition requires more time and analysis.
In our opinion the properties most suited to a SMSF are properties with low ongoing and maintenance cost and a high gross rental return. Therefore, we are generally not in favour of properties such as penthouses or home units with high ongoing maintenance cost. We prefer the investment property not to have lifts, gyms and pools this only increased the ongoing maintenance cost and reduces the net rental return.
When purchasing an investment property it is very important to do the numbers and purchase it as an investment logically not emotionally. You and your family are not able to live in a residential investment property owned by the SMSF, so the facilities and views of the investment are less important than the property’s return on investment. In summary, we prefer the property to be neutrally geared or positively geared rather than negatively geared.
Given that the property is owned by the SMSF we prefer the debt to be paid off prior to retirement otherwise depending on the level of debt the property may need to be sold at the time of retirement or retirement may need to be delayed.
Before purchasing a property in a SMSF you should be clear when the debt on that property will be repaid, based on the current rent, index by CPI, and taking into account the current level of superannuation payments made by the members.
To assist in determining how to invest in property in your superannuation fund, please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
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