Can You Buy An Investment Property With Your Superfund in Australia

Not sure if buying a property is an ideal investment from your superfund SMSF. Read this expert’s advice and decide yourself. 

Steve and his wife hope to retire in around 15 years. In a bid to have a pleasing and financially secure retirement, they have already opted for a super fund. Like any other ambitious couple, Steve and his wife want a good return on their SMSF super funds investment. Some friends advised them to invest in real estate where the return is likely to be very convincing. But Steve is not sure whether he can buy an investment property with his fund. 

Let’s face it, Steve is not alone who is straggling to decide whether buying property is an ideal investment, or even an investment option, from a superannuation fund in Australia. The reason is, it is not as straight as investing outside the superannuation environment. Along with meeting various legal obligations, you need to do your homework to ensure your investment comes with a good dividend.

Now let’s get to the main question! Can We Use Superfund To Buy An Investment Property?

The answer is ‘yes’. You can absolutely buy an investment property from your super. But it is a profitable option only for people who are 15-25 years away from their retirement. It will give you enough time to contribute to the Superfund and strengthen it. Besides, you’re likely to get the hold of the property well before your retirement.

But to do so, the first requirement is to set up a Self Managed Super Fund, because this is the only way to allow you to use your fund for property investment.  

Once superannuation fund SMSF is set up, you as a trustee or a member of the group become eligible to transfer your existing superannuation savings into this fund. Once you have sufficient balance, you can use it as a deposit to buy the property. Most probably, you would need an SMSF loan to complete your purchase. Remember, other than the fund you opt for, your credit score plays a major role to entitle you to SMSF loan, which can be up to 80% of the property price.

You get the ownership of the property as you soon as the bank loan has been credited to the seller’s account. Now along with your monthly contribution, the rental income of the property will be added to your SMSF. It will certainly help you repay the loan easily.

If you have enough funds in your SMSF and can buy the property without a loan, this would be the best case scenario. There is virtually no restriction on your investment. You can do whatever you want with your money. Buy a residential property in Australia or an exotic holiday home in Italy – the choice is yours. And your SMSF is here to fulfill your dream.

But you need an SMSF loan, you have some legal limitations. First, the property should be in Australia, and it has to be an acceptable security for your bank. The house you buy should in accordance with Australian government regulations. There is should not be any legal case pending on the property. In short, the lender will first analyze the property and then only the requisite loan will be processed.

The best option is to take help from a professional SMSF advisor, who can guide you to successfully manage your superannuation fund and make best property investment. Remember, a well-managed SMSF is a key to yield the best returns on your investment and make your retirement bright.

A financial adviser and writing enthusiast, Tony is currently working for SuperannuationRescue, a reliable SMSF specialist advisor firm in Australia.