The short answer is that yes, you can indeed buy an investment property with your super.
In order to do so, the first thing that you will need is to set up a Self Managed Super Fund (SMSF) which is the only vehicle which will allow you to use your superannuation to purchase a direct property.
Once the SMSF is set up, you and the other members of that fund (an SMSF can have up to 4 members) will be able to roll over your existing superannuation savings into this fund. That money can then be used to either purchase a property cash or as a deposit on property.
If you have decided to use the funds as a deposit on a property, you will need an SMSF Loan to complete the purchase. Depending on the type of property you are purchasing, that SMSF loan can be up to 80% of the purchase price.
The rental income from that property will be paid into your SMSF, along the members’ employers’ contributions. These incomes can be used to pay for the SMSF loan repayments and any other costs associated with the property or the administration of the fund.
So what type of property can you purchase with your SMSF?
If you don’t need an SMSF loan to use your Super to buy an investment property, there is virtually no limitation to what you can invest in. You can entertain anything from the classic suburban house to the most exotic US property.
If you do need an SMSF loan to complete the purchase of the property, your options are a little more limited. The property will have to be in Australia and it will have to be an acceptable security for your lender, which excludes some fringe properties: small floor plans, high density buildings or locations, some rural properties, properties requiring progress payments (house and land), student accommodations etc…
We’d always recommend that you obtain a pre approval for your SMSF before purchasing a property and would strongly encourage you to discuss any specific property with your broker before bidding or making an offer, just to ensure that it is suitable for lending purpose.