Can you use super to buy a house in Australia? Do you want to know more about acquiring a self-managed super fund (SMSF) property? You’ve come to the right place! Purchasing commercial or residential property through SMSF as an investment can be the perfect structure for you to maximise your retirement nest egg while minimising tax costs. As market-leading SMSF experts, we can help. And yes, the short answer is that you can indeed use super to buy an investment property.
The Process of Buying A Property Through An SMSF
- The first step toward buying an investment property through an SMSF is to set up a Self-Managed Super Fund, which is the only vehicle that will allow you to use your superannuation to purchase a property, whether now or in a pension phase later.
- Once the SMSF is set up, you and any other member of the fund (an SMSF can have up to 4 members) will be able to roll over your existing super fund savings into this fund. That money can then be used for cash flow, either to purchase a property or as a deposit on an SMSF investment property.
- If you have decided to use the funds as a deposit on an SMSF property, make sure you have an SMSF loan to complete the property purchase. Depending on when you buy the property and the type you are purchasing (residential property or commercial property), that SMSF loan can be up to 80% of the purchase price — that is, the loan to value ratio (LVR) can be up to 80%
- Remember, if you don’t have enough available capital, your fund may be able to borrow for the property purchase under a limited recourse borrowing arrangement (LRBA) — you’re welcome to ask us for more information on this; we have the expertise to help you buy a property through an SMSF. While it is a smart investment strategy, we know it can be confusing if you haven’t been through the process before.
- The rental income from that residential or commercial investment property will be paid into your SMSF. These incomes can be used to pay for the SMSF loan repayments and any other costs associated with the investment property or the administration of the fund.
- The sole purpose test requires that your fund must be maintained only for the purpose of providing retirement benefits to fund members, or a related party in the event a member dies. Please speak to your broker for more information on the sole purpose test.
What Type of Property Must I Purchase with My SMSF?
The choice is yours! If you don’t need an SMSF loan to buy property with your super, 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, or even a commercial property, holding a single asset or many. There are many retirement benefits too.
If you need an SMSF loan for purchasing property, your options are a little more limited. A property purchased through an SMSF will have to be in Australia, and it will have to be 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 and other forms of residential property which may require property management. Don’t forget this could factor in repairs and maintenance and other expenses down the line, too.
When it comes to buying property with SMSF, 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 purposes. This is the best way to bring confidence in your SMSF property investment and join the property market with sound financial planning.
A Good Investment Strategy
With tax-deductible benefits for business owners, it’s always an investment strategy worth exploring. For SMSF to buy enquiries, our team holds years of experience through every aspect of self-managed funds. So, when it comes to investing in property through a self-managed superannuation fund, we are the team to speak to. Together, we organise more limited recourse borrowing arrangements in a week than most other brokers or bank branches in a year, with an intelligent knowledge of market value.
We believe that buying property through your SMSF doesn’t need to be stressfu. We are different from other lenders because:
- We fully specialise in SMSF lending
- We have our own credit license, allowing us to deal with a wide variety of SMSF lenders so that we can offer you a wider option of loans compared to our competitors, even including the banks
- All brokers are SMSF lending accredited with MFAA (Mortgage and Finance Association of Australia)
- When it comes to investing in property, we maintain good relationships with other SMSF specialists, including expert lawyers and accountants, providing access to top-rated advice across all aspects of SMSF
Experts in SMSF Loans
Owing to our knowledge and expertise, we come as the recommended finance providers for a large number of SMSF administrators and financial planners nationwide. The process involved with setting up SMSF loans can be complex, but our goal is to keep the process as painless and simple as possible.
If you are an SMSF trustee looking at borrowing money to buy property through an SMSF, or need financial advice and assistance with capital gains, rental income, taxable income, stamp duty, negative gearing or any other matter linked to SMSF, please contact us.
We will discuss your financial situation in the strictest confidence. And with excellent client reviews, you know you’re in safe hands.
If your SMSF cannot cover the full value, and you need to explore negative gearing or borrow money, we can help and advise you. We care about your future and making sure you have the right lending structure to see the best results.