Using Super to invest in property? Not a Myth but a FACT!

Written on the 15th of March 2010 by Nicholas Sinclair

Did you know that under recent changes to legislation, your Self Managed Superannuation Fund (SMSF) can now purchase residential, commercial and retail property? It sounds almost too good to be true but your fund makes all loan repayments and when the property is paid off, ownership of the property is transferred to the SMSF.

Your other SMSF assets remain fully protected as in the event of default, the borrower only has recourse to the mortgaged property. The property is dealt with in the same way as a ‘normal’ investment property and can be renovated, repaired and sold in the usual fashion, it can even be rented out with all rental income paid directly to the SMSF. The property can be paid out at any time, subject to the conditions of the mortgage, and some lenders even offer discounted mortgage rates for this type of borrowing.

As this is a relatively new phenomenon in the Australian market, some banks are still wary of lending to SMSFs, particularly as they have no recourse to the fund’s other assets in the event of a default. Banks have found a way around this though by insisting on an additional guarantor when lending to SMSFs.

The other hurdle in finding an institution willing to lend to SMSFs is not many mortgage brokers or bank managers fully understand the concept. There are a small number of specialist brokers who have jumped on the bandwagon early though and they’re worth seeking out to find out more about the guidelines and lending requirements. Finance experts are already claiming this as the best news to hit Self-Managed Super Funds for years. For more information on this, or any other financial topic, simply call us at Wealthfarm Financial Planners.