Buy property with your SMSF |
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| Self managed super - SMSF resources |
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While the GFC sent stock market prices bipolar you've had to sit and watch property prices rise, wishing there was a way to put some of that hard earned money to work in bricks and mortar. As it happens, there is.
Change in rules for borrowing against SMSFs Back in September 2007 the rules governing self managed super funds (SMSF) changed so that you could now use your super funds to borrow to invest in an asset, including property. Up until then, if you wanted to buy property, your super fund had to purchase it outright. But with the new changes to super, you can borrow up to 80% of the property value depending on the type of property and mortgage lender. So if you have a self managed super fund, or are considering one, this could be a great way to leverage super and grow your assets. What sort of property can I buy with my SMSF? Through your self managed super fund, you can get a home loan to purchase property, including residential, commercial, retail, rural or holiday apartments. It's important to remember that this is for investment property only so you can't live in it. How does the SMSF work? 1. Get a lawyer to establish a property trust outside your super fund What are the benefits of borrowing through your SMSF to purchase an investment property in Australia? Some of the advantages of a SMSF home loan is: • The ability to leverage an asset • Numerous tax benefits • Diversification for your investment portfolio • 10% capital gains if you hold the property for more than 12 months and potentially nil if the property is sold when the self managed super fund is in pension phase • Tax deductible interest costs • The mortgage lender has no access to other assets in your SMSF • Rent generated from the property does not count as a taxed contribution Should you borrow to invest in property with your SMSF? Things you need to take into account before you get a home loan and purchase investment properties with your SMSF: 1. Do you have the cash flow and capacity to service the home loan? The bank will value the property and decide whether the rental income and any additional super contributions you make can cover the home loan. 2. Does your SMSF allow for this type of borrowing? You need to make sure that your trust deeds allows it, and you might need to provide provisions for it to do so. We recommend that you speak with your financial advisor first. 3. Does it tie in with your investment strategy? We recommend that you speak with your financial advisor to ensure it suits your needs, circumstances and investment strategy. 4. Can you cover additional costs associated with buying an investment property? Your SMSF is responsible for council rates, land tax, home loan interest and loan repayments, lender's fees, legal and accounting fees, repairs, property management costs, insurances, etc If you would like more information about buying a property with your self managed super fund, speak to one of the mortgage brokers at Intellichoice today on 1300 55 10 45. |
| Last Updated ( Monday, 12 April 2010 14:27 ) |
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