Buying Property with Super | The Investment Property Guys

Rules & Regulations

Making Informed Choices

The first step to using your Self-Managed Super Fund (SMSF) to invest in property is simply knowing where to start!

At The Investment Property Guys, our role is to support you through the process and provide the information you need to make informed decisions. A SMSF is an alternative investment strategy to plan for your retirement. It allows you, the trustee, to choose how your money is invested—from shares to property or other methods.

Using the accumulated funds in your SMSF, you could choose to purchase an investment property which can then be rented out until you retire. This yields a steady stream of passive income into your retirement fund. If your super lacks the funds to outright purchase a property, you may be eligible for an SMSF loan. This loan allows you to borrow against your super fund in order to purchase an investment property.

Accessing SMSF Loans

Using funds from your SMSF to purchase property is not structured like a traditional property investment loan. To be eligible, there are regulations around the type, style, age and even location of property that must be observed.

Location & Demand

Your investment property must have a high rental demand. Typically, this includes properties within a 50km radius of an Australian capital city or 35 km radius of a major city.

Bank Approval

The bank must also approve your investment property. New properties are preferred because they generally have lower ongoing maintenance costs, higher rental demand and the most probable increased resale value.

Positive Gearing

An investment property on an SMSF loan must be positively geared, or at least have neutral cash flow. For example, if you invest in a property, it is suggested that you would look to secure a 4.7% rental yield or greater.

No Personal Gain

Finally, it’s a requirement of SMSF loans that you can’t see any personal gain from your investment property. This means you can’t live in it, rent it to a family member or friend. You also can’t carry out

renovations and any repair work must be completed by a licensed third party.

Other Factors to Consider

In addition to the SMSF loan regulations, there a number of factors you’ll need to consider when planning your property investment strategy, such as:

Cash Flow

You’ll need to account for how your SMSF will affect your cash flow after you retire. For example, you could keep receiving rental payments into your retirement fund or you could choose to sell the investment.

Ongoing Costs

There are also ongoing expenses which may be associated with your investment, such as set-up costs, advice and legal fees, property management fees and more.

SMSF Contributions

Some investors choose to redirect their employer super contributions to their fund to aid in cash flow. Not only can this help you pay off your mortgage sooner, but it’s a smart way to delay the timeframe in which you pay tax on those contributions.

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