If you’ve ventured into property investment via your SMSF and are ready to expand you may be wondering if you can buy multiple investment properties with your SMSF? The good news is that you can grow your property investment portfolio through your SMSF.
Are There Limitations to How Many Properties You Can Buy Through Your SMSF?
The only real limitations are how much you have available to invest and whether or not you can gain finance approval should you need additional funding. You can buy multiple investment properties with your SMSF.
You will also need to factor in your fund’s ability to meet the ongoing costs associated with each property to ensure that additional properties are not detrimental to your fund’s investment goals.
Are the Investment Conditions the Same on Subsequent Properties?
Yes, the same rules apply to each property purchased. That is:
- It must meet the ‘sole purpose test’ which stipulates that the investment must only benefit fund members.
- It must not be purchased from anyone related to a fund member.
- It may not be lived in by any of the fund members or any related parties.
- It may not be rented out to a fund member or any related parties.
‘Related parties’ is a broad term that covers several groups beyond just relatives and friends. Ensure you understand this regulation in full to avoid any issues with compliance. Failure to be compliant can result in fines and possible jail time.
Financing Additional Investment Properties Via Your SMSF
Should you not have enough funds in your SMSF to cover the full purchase of additional properties you will need to enter into a new LRBA (limited recourse borrowing agreement) for each property you purchase. You can learn more about your borrowing options via our blog on this topic.
Keep in mind that the same complexities will apply to each new LRBA application, and you may find it harder to get approval as your portfolio grows. To avoid this, it is recommended that you seek expert financial advice, to ensure your SMSF is managed properly and it keeps an adequate balance.
With multiple loans and properties with ongoing expenses, you will want to ensure you have an expert handling your SMSF. This will keep you compliant and help to avoid any issues during audits.
Unfortunately, no, this strategy is not permitted when expanding your SMSF property portfolio. While this is a commonplace avenue in normal property investment, the regulations and legislation set up to govern self-managed super funds stipulate that equity may not be used.
If you prefer to use equity to grow a property investment portfolio, you will need to do this outside of your SMSF.
At Corbwood & Associates, our specialist SMSF experts can guide you through every aspect of SMSF property investment. Contact us today on 07 5609 7670 to arrange a consultation to see how we can help secure your financial future.