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So, how does investing my super in property compare to the returns I'm seeing from my existing retail fund?

Buying property through your SMSF is quite complex, but there are many common mistakes when buying an SMSF property that can be easily avoided. The key is to ensure you understand the detailed regulations surrounding SMSF investing before diving in. For a smooth and uncomplicated SMSF investment property purchasing experience, you should also engage the help of a licensed financial advisor. How Hard Can It Be? If you have ever bought property before you might be tempted to think that SMSF property investment will be just as straightforward. However, purchasing a residential property through your self-managed super fund comes with many rules and regulations that must be strictly adhered to. Investing through your SMSF is heavily regulated by APRA, the ATO and ASIC. Failure to comply with these regulations can lead to heavy fines and possible jail time so it is critical to approach SMSF investing from an informed and cautious position. 6 Common Mistakes When Buying an SMSF Property So, what are the major pitfalls to avoid? Failure to seek qualified professional advice: A financial advisor and a mortgage broker are not the same things. When it comes to advice surrounding your SMSF you need to ensure you are speaking with an experienced and fully licensed financial advisor that understands the ins and outs of SMSFs. Poor property selection: Not spending ample time researching a property and whether it will offer the return on investment you want is a mistake. One of the most common mistakes made when buying an SMSF property is that buyers go with their emotions over proven numbers. Remember, you’re not buying to live in it but to earn from it, there are also professionals that are there to support you through the process of choosing your property. Inadequate lending advice: SMSF loans or LRBAs are vastly different from a standard mortgage loan. Ensure you only speak to someone experienced in these loans and not a standard mortgage broker when seeking a loan or you may run into difficulties. Paying too much for financial advice: Expertise is vital, but it shouldn’t be exorbitantly expensive and drain your SMSF of vital funds. It is normal to budget a few thousand for advice, however, if it runs into the tens of thousands, you are paying too much. Overstretching your fund to make the purchase: All your investments need to be in the best interests of fund members and the long-term goals of your SMSF. Overstretching is a risk as it may leave you without essential funds to pay out a member if needed or cover the ongoing costs of your investment property. Not choosing the right solicitor or conveyancer: Just as with lending or SMSF advice, you should only engage legal representation that understands SMSF regulations in depth. Failure to do so could lead to delays and breaches of compliance.

If you’ve ventured into property investment via your SMSF and are ready to expand, you may be wondering if you can buy multiple investment properties with your SMSF? The good news is that you can grow your property investment portfolio through your SMSF. Are There Limitations to How Many Properties You Can Buy Through Your SMSF? The only real limitations are how much you have available to invest and whether or not you can gain finance approval should you need additional funding. You can buy multiple investment properties with your SMSF. You will also need to factor in your fund’s ability to meet the ongoing costs associated with each property to ensure that additional properties are not detrimental to your fund’s investment goals. Are the Investment Conditions the Same on Subsequent Properties? Yes, the same rules apply to each property purchased. That is: It must meet the ‘sole purpose test’ which stipulates that the investment must only benefit fund members It must not be purchased from anyone related to a fund member It may not be lived in by any of the fund members or any related parties It may not be rented out to a fund member or any related parties ‘Related parties’ is a broad term that covers several groups beyond just relatives and friends. Ensure you understand this regulation in full to avoid any issues with compliance. Failure to be compliant can result in fines and possible jail time. Financing Additional Investment Properties Via Your SMSF Should you not have enough funds in your SMSF to cover the full purchase of additional properties, you will need to enter into a new LRBA (limited recourse borrowing agreement) for each property you purchase. You can learn more about your borrowing options via our blog on this topic. Keep in mind that the same complexities will apply to each new LRBA application, and you may find it harder to get approval as your portfolio grows. To avoid this, it is recommended that you seek expert financial advice, to ensure your SMSF is managed properly and it keeps an adequate balance. With multiple loans and properties with ongoing expenses, you will want to ensure you have an expert handling your SMSF. This will keep you compliant and help to avoid any issues during audits. Can I Use My Super To Buy an Investment Property? Unfortunately, no, this strategy is not permitted when expanding your SMSF property portfolio. While this is a commonplace avenue in normal property investment, the regulations and legislation set up to govern self-managed super funds stipulate that equity may not be used. If you prefer to use equity to grow a property investment portfolio, you will need to do this outside of your SMSF.