Buying Property in a Self-Managed Superannuation Fund in Australia | Property Twins™
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We have seen an increase in enquiries from clients looking to purchase property in a Self-Managed Superannuation Fund (SMSF).

What is a Self-Managed Super Fund?

A Self-Managed Super Fund (SMSF) is a private superannuation fund in Australia that is managed by its members. Unlike traditional superannuation funds, where professionals make investment decisions on behalf of members, an SMSF allows individuals to take direct control over their retirement savings.

What motivates Property Investors to purchase a property in SMSF?

Property Investors purchase investment properties in a self-managed super fund for a few key reasons.

  • Historically superannuation investments have been in stocks and managed funds through large industry superannuation funds. By purchasing property in a SMSF, investors diversify into another asset class.
  • Property is a tangible asset.
  • Unlike traditional superannuation funds, investors can choose which property to invest in, in line with their own investment strategy, rather than someone else’s investment strategy.
  • Rental income is typically steady.
  • Investors can leverage by borrowing against a property. For example, if someone invests $200,000 into traditional assets, and the market goes up 10%, they make $20,000. On the other hand, they invest this in a $600,000 property (and borrow 80% of the value being $480,000), and the property goes up by 10%, they make $60,000. That leverage allows them more ‘exposure’ to the market.

What is required?

Steps needed to take this journey

  1. Goals: Consider your long-term goals and why you would like to buy an investment property in an SMSF
  2. Borrowing Capacity: Have your borrowing capacity for an investment property determined, to check two things:
    1. Your borrowing capacity
    2. If your super balance is sufficient to purchase an investment property
    3. What are the specifics of Funds required to complete the purchase?
  3. Set up SMSF: Once your borrowing capacity has been determined, contact an accountant to set up your SMSF
  4. Pre-approval: Apply for a pre-approval with your chosen lender.

Funds required to purchase a property

  • Funds required: Typically, members require a 20% deposit, plus stamp duty and purchase costs. For example, a $550,000 property requires:

Deposit 20% of $110,000
Stamp duty (NSW assumed) $20,200
Legals etc $3,000
Total Funds required of $133,200

  • Liquidity: Some lenders also require you to hold cash or liquid assets which is equivalent of 5% of the loan value. As such, if you borrow 80% of $550,000 being $440,000, then the bank will require you must have funds for ‘liquidity’ of 5% of $440,000 being $22,000
  • This means you will require a total of $155,200 to purchase a $550,000 property (subject to a borrowing capacity assessment) – being $133,200 plus $22,000
  • What if you have a less than 20% deposit? There are some lender options where you may be able to do with less than a 20% deposit

How Property Twins can assist on your journey?

  • Mortgage Broking services – to arrange loan for your SMSF
  • Property Buyers Agency – we search select and negotiate good deals, in good locations, by giving you the best possible chance of securing these properties
  • Schedule a time for an initial 15-minute call on so/property twins
  • Email us on: [email protected]

To Get Started: Schedule A Chat with the Property Twins Team
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Note: Please ensure you always seek specific specific credit, tax, financial, legal or investment advice. Property Twins' Blogs are not a substitute for personal and specific, taxation, financial, legal or investment advice

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