SMSF Investment Property

Property Investment with Self Managed Super (SMSF)

SMSF’s are becoming an increasingly popular way for people to take control of their Super and use it to purchase SMSF investment property.
Primarily the most important issue for most people who choose to run a SMSF is the level of choice and control they can exercise over the investments in the fund. With an SMSF, you have the choice to purchase investment property in your SMSF.

A SMSF Investment Property may be possible providing the following conditions are met –

• The borrowed funds for the SMSF Investment Property are used to purchase a ‘Single Acquirable Asset’; (e.g. established or recently built property).

• The SMSF must comply with all other relevant Super laws for example the ‘In House Asset’ restrictions;

• The SMSF Investment Property must held on trust for the SMSF by another entity; (known as a ‘Bare Trust’).

• The SMSF must have the right to acquire legal ownership of the SMSF Investment Property by making payment.

• The lender’s recourse against the SMSF must be limited to the underlying SMSF Investment Property asset (ie the purchased property). The lender must not have a right of recourse against other assets of the fund. The lender does not necessarily need to be a bank, a number of options are available including the ability to borrow from personal funds.

Where a fund invests a significant portion of its assets in real property, the trustees must ensure that the funds level of investment in direct property is in line with the fund’s investment strategy, including diversification of assets, liquidity, and maximization of member returns in the fund.

How does a SMSF purchase a property?

SMSF Investment Property Example

Assumes Purchase Price of $500,000

BANK
The SMSF will get a loan. Lets assume a deposit of 30% is paid and the balance is borrowed from the bank. $150,000 deposit | $350,000 loan.Repayments at 6.5% are $22,750 per year.

EMPLOYER
Pays the 9.5% Super contributions into the SMSF. Let’s assume members of the fund earn a combined $150,000 per year. That means super contributions of $14,250 per year.

TENANT
The SMSF receives the rent paid by the tenant. Let’s assume $475 per week or $24,700 per year.

EXPENSES
The SMSF will be responsible for the costs of running the property. Let’s assume 1% of the purchase price per year for rates, insurance, property managers fees etc. In this case $5,000 per year.

Seek advice before making decisions on your Super. We do not provide financial product advice nor recommend any financial products.
Once your SMSF is setup, we can assist with finding the right property suitable for the SMSF’s budget.

If you set up a self-managed super fund (SMSF), you’re in charge – you make the investment decisions for the fund and you’re held responsible for complying with the super and tax laws. It’s a major financial decision and you need to have the time and skills to do it. There may be better options for your super savings.

An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. Don’t set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal. See the Australian Tax Office’s website on SMSF here.

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A Personalised 60 Minute Investment Property Strategy Session with me in your home or via video (worth $595)
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My 16 page Investment Property Cheat Sheet covering Tax, Finance and Investment Property.

I look forward to meeting you.
Daniel Goodwin, CEO Prowealth

In this FREE Property Investment Strategy session, Prowealth CEO Daniel Goodwin will show you how to create a plan to secure your financial future.
LEARN HOW TO…

CREATE Instant Cash Flow of $50-100 per week from your existing Home Loan.

IMPLEMENT Tax strategies saving around 20% of the tax you pay right now and thousands over your working life. Get this wrong and it could easily cost you $100,000 in profit.

DISCOVER The strategy to pay out your home loan in 10 to 15 years and save hundreds of thousands of dollars in unnecessary interest costs.

AVOID The uncertainty of your Super and the share market by using your SMSF for a cash positive bricks and mortar investment property.

ACQUIRE A top performing investment property for as little as $7 a day, maybe even less.

UTILISE The investments you make now to enable you pay out debt, help your children get into their first home or simply enjoy the freedom of being financially secure.

Prowealth CEO and Leading Investment Property Advisor Daniel Goodwin has appeared and provided commentary in the following media publications and is the best selling Author of “10 Secrets of Professional Property Investors”

This is an example only. The table shows the positive cash flow from example figures used in the above diagram. Excludes fees and taxes and other costs where applicable. Does not take into account any other transactions of the SMSF.

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