A Super Way of Maximising Your Property Investment
For many Australians, investing in property is nothing new – but being able to utilise and unlock your superannuation to invest in property is providing fresh opportunities to accelerate your investment goals.
And the reasons for this are very clear.
By investing in property through your self-managed super fund (SMSF) you have the opportunity to diversify your investment portfolio, and acquire a larger property portfolio in a more beneficial taxation environment - allowing you to build equity at a greater rate and own the property sooner.
So for those who have already opted to take control of their superannuation by setting up their own SMSF, this investment option offers an attractive opportunity to broaden their existing portfolio in an asset class which they may not have previously considered.
For others who are already experienced property investors, it can provide a new vehicle to build wealth for their retirement by establishing an SMSF specifically to facilitate that process.
Whatever your reasons may be for considering this as a financial option, you will need to find an appropriate loan package to help fund your investment. The SMSF lending environment continues to become increasingly competitive as lenders progress with the innovation of new products.
Therefore, as you start your research, use that time wisely and shop around for the most appropriate lender for your needs. Some will offer more experience in this area and can also offer a greater range of loans specifically for the purpose of purchasing property through an SMSF.
If you decide that investing in property through an SMSF could be the right investment choice for you, there are then six key steps to follow:
Research all the requirements and implications of incorporating this as part of your overall investment strategy, because adopting this as part of your superannuation planning requires a long term commitment to help you build that financial platform. Accordingly, you need to be clear about what taxation implications investing in a property will have on your personal circumstances, now and in the future. So from the onset, seek clear professional and independent advice from a range of legal and financial specialists. This will also allow you to get a clear idea of the relevant set up and ongoing costs of the fund such as auditing to ensure it remains compliant. Some of these costs may be able to be negotiated with the relevant professional you use.
Establish your SMSF if you don’t already have one. This process includes getting all the complying legal framework and structure in place when you set up your fund. Once more, it is recommended you look at engaging the assistance of a reputable solicitor, accountant or SMSF specialist administrator. They will also be able to offer support if needed to guide you through the compulsory SMSF requirements, including providing the detail around how the property fits into your broader investment strategy.
Establish your property trust. This process can also be facilitated by your solicitor or accountant and is the legal structure that allows you legally hold the property as an asset as part of your superannuation. It’s important to know that you cannot apply for your Trust until your SMSF is fully operating, so allow adequate time for this process to occur.
Find the right property. This may seem like an obvious directive but it’s easy to get caught up in marketing and sales spin when you’re shopping in what is currently a buyer’s market. Investing in property through your SMSF will allow you to access funds to acquire a better quality property with the potential for higher rental yields and stronger capital gains. Ensure the area has reliable and established surrounding infrastructure which is appealing to a wide demographic and more likely to result in a stable tenancy.
Seek out the services of a reputable lender to arrange your finances for the property. When you look around at what lenders are offering, you may find rates could vary depending on the number of checks and balances in place, so when you are comparing, have a close inspection of exactly what you are getting from each lender. There are a range of products on the market that are reasonably priced and some organisations will also be able to assist you in setting up your SMSF and Trust. You may also find some lenders apply different criteria as part of their approval process and also have their own limitations on the type of property you’re able to purchase, so ensure you investigate the specific requirements of each one.
Finally and importantly, ensure you keep up to date with all ATO draft rulings on SMSFs and property. This may include updated variations on what is claimable and on more specific matters related to depreciation so make sure you’re aware of any changes in legislation which may impact your investment.
To find out more about loan options related to investing in property through an SMSF, you can contact resi on 136 126.
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