SMSF Property Investment Solutions
Over the past year or so, there has been a ''super rush'' to property, and specifically SMSF borrowing. At the end of June 2011, domestic real property amounted to around 15 per cent and residential property around 3 per cent of total self-managed super funds. More recently, real estate agents report a surge in property purchases within these funds. Internet sites advertising super property deals have also blossomed.
Since September 2007, under the Superannuation Industry (Supervision) (SIS) Act, a superannuation fund trustee can borrow money to acquire a beneficial interest in an asset. The SIS legislation previously referred to this as an instalment warrant arrangement, but this has been amended to describe the arrangement as a limited recourse borrowing.
When deciding whether the SMSF fund should purchase outright or borrow to invest in these or other eligible assets, the trustees should consider a range of factors, including the expected investment returns and relevant borrowing costs, such as loan interest.
Property Strategies & Opportunities
A SMSF can invest in property locally or overseas. In addition, a SMSF can invest in both commercial and residential property. The purchase could be outright using cash or using a limited recourse borrowing arrangement. When investing in overseas property, you might have to use a foreign company to facilitate the investment.
There is a vast array of strategies available to use borrowing inside a self-managed super fund. Consider some of the following arrangements where this strategy might be beneficial:
- Your business no longer wants to rent or wishes to upgrade their existing premises.
- Commercial property held outside of super (you can transfer the property into a SMSF).
- Residential or commercial property investors.
- People looking to buy a property for retirement in the years to come.
- Property development & using a SMSF.