Using your super to buy property
By | 7th Aug 18

Using your super to invest in property

Superannuation is often a topic that is not taken seriously – we find a lot of people place it in the set and forget bucket because there’s quite a lot of information that surrounds the various ways of managing your super. For most people, their super contributions are made by their employer each month.

 

If you have noticed your super go up and down each month, it is because the fund you have chosen is investing that money (most likely in shares) which generally fluctuates depending on the market. For some people, thinking of their retirement is not a priority, but if you are looking at ways to grow your portfolio, utilising your super to purchase property could be an option for you.

There are a number of super investment options and a SMSF or Self - Managed Super Fund allows you to take control of you super contributions and decide where and how those funds can be invested.

There has been an increase in enquiries on how to buy with super, so we have some basic principles if you are looking to embark on this journey. Please note the government changes its regulations frequently, so it’s imperative you speak to an expert before you self-manage your super.

 

Using your super to invest in property

The basic rule is that you can use your super to purchase an investment property that will have a regular rental return. Your fund can be made up of up to four members who can contribute and allows them to make their own decisions on how this money is invested. Setting up a SMSF is highly regulated with plenty of changing rules, so we recommend you speak to your accountant or financial advisor to understand the various responsibilities involved in setting up the fund correctly.

 

Leveraging your super to borrow and buy

The great thing about using your super to purchase an investment property, is that you don’t have to have the full amount saved to purchase property. You can use this super to leverage a loan for an investment with the rental returns servicing the mortgage. Understanding leverage and gearing will allow you to purchase an investment property that will hopefully grow in capital over the time you are working. Keep in mind your borrowing capacity through a SMSF is highly regulated and strict. For example, you can’t use all the balance in your super for a loan and the banks who do provide loans for SMSF's allow you to borrow only up to 70% of the property’s value. Essentially, you are required to keep a buffer in your fund – 10% of the proposed investment value.

 

Seek Professional Advice

It is imperative that you seek professional advice when it comes to managing your super. Having a clear understanding of what fees or regulations are involved is vital when using your super to purchase an investment property.

It may seem like there’s quite some work involved, but if you are keen to use this strategy, it can really help with your retirement. We have great partnerships with financial advisors and accountants – if you would like your investment strategy to include a SMSF get in touch so we can help! Email us for your one on one free consultation at buyer@advantageproperty.com.au

Please note any information provided in this article is based on general advice only and does not take into consideration your personal circumstances.