Hi. We have enough funds in our Super Fund to purchase a 'cheapish' investment property. Hoping someone can point us in the right direction to find out more about the pros and cons of purchasing property through Super. Also, can a Super fund 'join forces' with a another party to investment with them, and will banks lend to Super funds for investment property purchases?
WBProperty investing with super is still a bit of a specialized area so you should consult an accountant experienced in this field. They will need to confirm that the trust deed allows that type of investment before you commit to a property otherwise you may lose your beneficial tax status. Banks will lend to smsf but are more restricted in the LVR allowed.
Watch out that you don’t breach your funds rules by not diversifying your investments.
Ignore all of the above as it will probably change again after tonights budget.
Thanks 'No Mates', we'll see what Mr. Swan has for us tonight
Hubby and I have just done this – Richard Taylor from this forum got the process rolling for us, we settle next week.
It has cost approx $10k to do this (we were able to use our Super money for this cost).Its a great way to purchase but as always it has some good & bad points.
Firstly you can only purchase a completed house not house/land where by the super fund buys the land and builds the house the banks wont do it. As previously stated accountant NEEDS to know what they are doing and make sure they explain all the good & bad points before you enter into it.
We have had a couple of clients purchase this way which has been a challenge at times but in the end works out perfectly as it is neutrally geared and making the fund money.
Sorry Trent that is clearly untrue
Firstly you can only purchase a completed house not house/land where by the super fund buys the land and builds
I have done many of these in my SMSF.
Funding the deal maybe a different matter but again that can be acheived albeit a bit around the houses.
You can purchase vacant land, construct, renovate etc as long as all such investments are covered off in your Trust Deed or the Trustees agree to such an strategy.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
First post for me, so much great information on the forum, thanks to all.
Very much a novice investor, but have negaged experienced professionals to guide me through most of the pitfalls.
Looking to purchase my first investment property shortly and am looking into a SMSF later this year.
Very informative thread
Qlds007 wrote:Sorry Trent that is clearly untrueFirstly you can only purchase a completed house not house/land where by the super fund buys the land and builds
I have done many of these in my SMSF.
Funding the deal maybe a different matter but again that can be acheived albeit a bit around the houses.
You can purchase vacant land, construct, renovate etc as long as all such investments are covered off in your Trust Deed or the Trustees agree to such an strategy.
Cheers
Yours in Finance
Richard,
I must apologise for being misinformed around this matter. We would love to speak to you further around this matter as the people we have had involved may have misguided us with this information and the banks.
I concur with Richard but would limit what you can do in a smsf to a development which has a DA not to undertake a development from an existing raw site as this would effectively be changing an asset which may be a breach of smsf regulations.
No problems in doing a development as long as the SMSF is not seen to be running a business.
Dont worry Trent be suprised how many of people in the industry have no idea about SISA legislation.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Richard, I am not so concerned about being able to undertake a development in a SMSF but I understand it to be contrary to the legislation to change the nature of the asset ie you can purchase a site with a DA and build it however you cannot hold a raw site/house then take advantage of a change in zoning or increase in FSR within the fund as you are fundamentally changing the asset. Borrowing to do such can become a breach of the SMSF and lose your tax advantages of holding within the fund. Likewise, it can be seen that you can undertake repairs and maintenance however you cannot change the asset by adding an extra bathroom or floorspace etc (without possibly taking out a whole new loan). There was an article in last weekend's Sunday Herald in Sydney on the topic (however I don't believe everything that I read in the papers).
SNM
If in doubt i would be getting a private binding ruling.
I have done a couple of deals where i have purchased a block of units in my SMSF zoned multi unit dwelling and then strata titled the block changing the zoning to residential and sold off some of the units.
In each the Fund was fully audited and never had an issue.
Must admit i dont agree with the comments made in the paper if that the case and in the main seem to relate to borrowing of funds thru a Security Trust. This is a different matter. My comments were not made in relation to the fund taking out borrowings unless done thru a related party / Trustee loan.
As Trustee you cannot control local government decisions to rezone and therefore could not be held responsible.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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