How to Buy Property with Super Funds – Tips To Go the SMSF Route

A Self-Managed Super Fund Property can bring about a plethora of benefits to you as an SMSF owner. One is: it is tax-saving. The property’s tax can be as little as 15%. Another is: you can use gearing that will allow you to buy properties/shares to grow your Self-Managed Super Fund Property Investment at a faster pace.    

Follow these additional tips when deciding to buy a property via SMSF:

Use LRBA

LRBA is short for Limited Recourse Borrowing Arrangement. LRBA is the alternative most people use if they do not have enough SMSF funds to buy the properties they want to buy.

Under the LRBA process, a third-party lender lends money to a borrower, the agreement between the two parties being that all the borrowed funds can only be used for a single-asset purchase.

The advantage of this arrangement is that the lender does not have access to the part of the borrower’s SMSF fund that is not related to the property. That part of the fund is inaccessible to the lender whether or not the borrower’s investment succeeds.

Read the Fine Print

Carefully choose the property and the amount of loan with which you will cover the purchase cost. There are more restrictions concerning the use of SMSF loans.

If you need to renovate the property later, you cannot use your loan for that purpose. Renovation costs are shouldered by the SMSF fund.

Think Income

Many buyers make the mistake of buying hastily just because a property is offered at a lower price, while missing the point that saving a few hundred dollars today may be immaterial after a few years. Buy the property that can ensure good income and investment growth over the long term. Think good property, good location, good income, and rapid and vigorous investment growth.