Common Mistakes When Buying an SMSF Property

Common Mistakes When Buying an SMSF Property

Buying property through your SMSF is quite complex, but there are many common mistakes when buying an SMSF property that can be easily avoided. The key is to ensure you understand the detailed regulations surrounding SMSF investing before diving in. For a smooth and uncomplicated SMSF investment property purchasing experience you should also engage the help of a licensed financial advisor. 

 

How Hard Can It Be?

If you have ever bought property before you might be tempted to think that SMSF property investment will be just as straightforward. However, purchasing a residential property through your self-managed super fund comes with many rules and regulations that must be strictly adhered to. 

Investing through your SMSF is heavily regulated by APRA, the ATO and ASIC. Failure to comply with these regulations can lead to heavy fines and possible jail time so it is critical to approach SMSF investing from an informed and cautious position. 

 

6 Common Mistakes When Buying an SMSF Property 

So, what are the major pitfalls to avoid?

 

Failure to seek qualified professional advice: 

A financial advisor and a mortgage broker are not the same things. When it comes to advice surrounding your SMSF you need to ensure you are speaking with an experienced and fully licensed financial advisor that understands the ins and outs of SMSFs. 

 

Poor property selection: 

Not spending ample time researching a property and whether it will offer the return on investment you want is a mistake. One of the most common mistakes made when buying an SMSF property is that buyers go with their emotions over proven numbers. Remember, you’re not buying to live in it but to earn from it, there are also professionals that are there to support you through the process of choosing your property. 

 

Inadequate lending advice: 

SMSF loans or LRBAs are vastly different from a standard mortgage loan. Ensure you only speak to someone experienced in these loans and not a standard mortgage broker when seeking a loan or you may run into difficulties. 

 

Paying too much for financial advice: 

Expertise is vital, but it shouldn’t be exorbitantly expensive and drain your SMSF of vital funds. It is normal to budget a few thousand for advice, however, if it runs into the tens of thousands, you are paying too much. 

 

Overstretching your fund to make the purchase: 

All your investments need to be in the best interests of fund members and the long-term goals of your SMSF. Overstretching is a risk as it may leave you without essential funds to pay out a member if needed or cover the ongoing costs of your investment property. 

 

Not choosing the right solicitor or conveyancer: 

Just as with lending or SMSF advice, you should only engage legal representation that understands SMSF regulations in depth. Failure to do so could lead to delays and breaches of compliance.

 

Where to Seek Help 

 

If you are ready to invest through your SMSF but want to avoid these common mistakes when buying an SMSF property, you need Corbwood & Associates. Our fully qualified, experienced and licensed financial advisors can walk you through all aspects of SMSFs and winning investment strategies, making your experience as stress-free and streamlined as possible.  

Contact us today on 07 5609 8874 to arrange a consultation to see how we can help secure your financial future.

The Do’s and Don’ts Of Investing In Property Through A Self Managed Super Fund (SMSF)

The Do’s and Don’ts Of Investing In Property Through A Self Managed Super Fund (SMSF)

If you’re considering investing through your self-managed super fund, you’re probably wondering about the do’s and don’ts of SMSF property investment. While investing through your super can yield a whole host of great benefits, you do need to proceed with caution as it is heavily regulated and consistently audited. 

Things You Should Do

If you have a sufficient balance and meet all of the other requirements, you will get to the point in the process where you need to decide on what type of property and where you wish to buy. During the process of choosing there are many things you need to factor in. Before and after signing on the dotted line you should:

  • Create a detailed investment strategy with your advisors that outlines risks, potential returns, cash flow liquidity in relation to the property and ensure this is available to all fund members.
  • Research the areas you wish to invest in and seek professional advice through the Corbwood & associates network regarding the growth and future potential for properties you are interested in. 
  • Comply with all superannuation and taxation laws, ensuring you keep updated SMSF records and update the ATO of any changes as needed. 
  • Understand the specifics and possible challenges related to SMSF loans if additional funds are required. 

Things to Avoid

Conversely, things you should not do when investing with your Self Managed Super Fund (SMSF) include:

  • Buy a property you intend to live in or intend to let family/friends live in.
  • Buy property from friends, family, fund members or their associates.
  • Sell an SMSF property to an associated party at lower than market value.
  • Attempt to invest without qualified financial advice. You can quickly find yourself overwhelmed by the details, or in breach of the legislation.  

The reason to avoid all of these is that they contravene the guidelines set out by the ATO, ASIC and APRA concerning SMSF investing. Should you be audited and are found to be in breach of these guidelines, you may face hefty fines and even jail time. 

Corbwood & Associates Can Help You With SMSF Property Investing

At Corbwood & Associates we can assist you and introduce you to the appropriate professionals that can advise you in the specialised areas. SMSF investing is complex and incredibly detailed, so it is important to have an expert in your corner. 

Our advisors are passionate about helping you navigate SMSF investing and helping you to create a secure financial future. We can support you to do this with minimal stress and in full compliance with all relevant regulations so that your fund can continue to grow and create the retirement you dream of. 

For detailed advice surrounding all the do’s and don’ts of SMSF property investment, contact Corbwood & Associates today on 07 5609 8874.

How Much Super Do I Need to Invest in Property?

How Much Super Do I Need to Invest in Property?

For the majority of us, buying property as an investment is something we would love to include as part of our retirement strategy. With property prices rapidly increasing all over Australia this can seem unachievable as deposits are higher than ever. Thankfully, there are avenues through which you can use your super balance to invest. If this has you wondering ‘how much super do I need to buy an investment property?’, then read on. 

Can All Super Funds Invest in Property?

In short, no. Only approved self-managed super funds (SMSFs) can use their balance towards property investment. Should you have your super in an industry or retail fund you will not be permitted to access your balance until you reach pension age, though there are some exceptions to this, such as due to terminal illness or other extenuating circumstances. 

The good news is, setting up an SMSF is possible for the majority of people that qualify. In order to qualify, you must meet the minimum requirements set by the government. On average a balance of $200,000 may be a sufficient amount to give you the opportunity to purchase property through your SMSF, however, that is only one of the many requirements that are considered before you can qualify to set up a Self Managed Super Fund and is based on individual circumstances. When it comes to determining a minimum balance to buy an investment property there are a lot of things considered and this may vary based on which professionals you engage with to support you through the process. 

Setting up an SMSF has many benefits beyond just choosing your investments, but should still be considered carefully to ensure it is the right option for your needs. A consultation with a financial advisor in the Corbwood & Associates network can help you make this decision and create your SMSF. 

How Much Super Do I Need to Buy An Investment Property?

The general consensus is that you should aim to have a balance in the vicinity of $200,000. This amount is considered optimal as it not only covers a deposit but should also cover associated fees and ongoing operational costs related to the fund and the property itself. But as mentioned before this may vary depending on individual circumstances and the professionals to decide to engage with. 

Keep in mind that you are not permitted to use your entire super balance to invest, you must keep a liquidity buffer as per the conditions set out by the ATO, APRA and ASIC. Should you need additional funding to purchase the property, a higher super balance may also help you secure a more competitive loan.

Turn To Corbwood & Associates For Advice On Investing With Your SMSF

At Corbwood & Associates our team of professionals and trusted associates understand SMSF investing in depth. Our financial advisors will be able to assess individual circumstances to give you an idea of how much super you need to buy an investment property in a high-growth area. We are passionate about helping our clients create an abundant financial future through SMSF investing. Whether it is your first investment or an addition to an existing portfolio, our network of expert financial advisors can ensure you remain compliant and invest wisely. 

In order to assess your individual circumstances, Corbwood & Associates can introduce you to our trusted financial advisors to best understand your personal financial position and best advice you going forward, and what your options may be if you qualify. 

Stop wondering ‘how much super do I need to buy an investment property?’. Contact the SMSF investment experts at Corbwood & Associates today on 07 5609 8874.

How to Create an SMSF Investment Strategy with Property

How to Create an SMSF Investment Strategy with Property

If you’re the trustee to a self-managed super fund (SMSF), you have likely spent time learning how to create an SMSF investment strategy. Working with your financial advisor to strategise your investments is the key to ensuring you have a diverse portfolio that offers optimal returns both now and into retirement. 

What Is an Investment Strategy with Property?

An SMSF investment strategy with property is a tailored financial plan that is created by the trustees of an SMSF, or your financial planner, taking into account the current and future financial needs of each member in the fund. It covers the use of the property as part of the investment portfolio and details the risk of the investment, its liquidity, and tax flow requirements as well as outlining the expected returns both in the short and long term. 

To create an effective SMSF property investment strategy in Australia you should follow these steps:

  • Know your legal requirements- It’s best to engage with a professional to support you through the process.
  • Understand the risks involved with investing in property and the potential for return trade-offs. 
  • Diversify your property investments: Just as your portfolio should be diversified, so should the property in which you invest. 
  • Ensure you have enough cash flow to keep the property maintained and your fund properly managed. For the property you’ll need to cover insurances, maintenance, taxes, and real estate fees. For your SMSF you need to factor in audit fees, bank fees, annual fees, and any pension payments required by fund members. 
  • Review and research potential property investments carefully before purchasing and ensure they represent a good opportunity for growth to support your financial future. 
  • Seek professional advice from a qualified financial advisor or company to ensure your strategy meets the legal requirements and represents an intelligent move for your portfolio. 

The Legal Requirements When Investing Through Your SMSF

Investing in residential property in Australia through your SMSF is not as simple as just outlining your goals and hopes for investment performance. There are strict regulations and laws surrounding your investment strategy creation through SMSF.  

As the trustee of an SMSF, you are legally required to review your investment strategy (with or without property involved) on a regular basis. This review needs to ascertain whether your initial goals and their possible outcomes remain both relevant and achievable. This assessment needs to consider the needs and expectations of all fund members. 

How Corbwood & Associates Can Help

At Corbwood & Associates we’re able to advise on, and connect you with the right professionals with all things related to SMSF investing and wealth creation. We work alongside you and teach you how to create an SMSF investment strategy that helps you prepare for a financially secure retirement for you and your family. 

Understanding the ins and outs of how to create an SMSF investment strategy is something we have years of experience with. Engaging one of the qualified financial advisors in our network reduces your stress and enhances the likelihood of creating a winning high-performing property investment. 

Contact Corbwood & Associates today on 07 5609 8874 and learn how to create a winning SMSF investment strategy.

Navigating the rules and regulations of buying a property through self-managed superannuation

Navigating the rules and regulations of buying a property through self-managed superannuation

 Having a self-managed superannuation fund (SMSF) has become a popular decision over the last few years. Seemingly the on trend decision for everyday Aussies aiming to take greater control of their financial future. Whilst the positive results of taking such a step are evident, one thing that we strongly encourage is to research all of the ins and outs, before deciding whether an SMSF is right for you. 

It is essential to understand every single one of the rules, regulations and obligations of a self-managed superannuation fund – especially when set up with the intent with which to be able to borrow money and ultimately purchase an investment property.

During this short article, we will look to break down just a handful of the major restrictions you will face when purchasing a property with your super, which we hope will help you to navigate the property market and understand the very small portion of properties that are suitable to be purchased through a self-managed Superfund, against the vast majority that you will see on realestate.com.au, which unfortunately are not able to be purchased due to very specific lending criteria laid out by the small numbers of banks that will offer loans in the space.

A finished build, purchased under a single contract

Firstly, one major thing to note when purchasing a property through your self-managed superannuation fund is that the property must be completed. It cannot be off the plan or under construction. You cannot purchase what is known as a “two-part” contract for house and land – you must instead purchase a single contract, with both the house and the land considered in the same sale.

Location + Demand 

The property must be in a high rental demand area, typically summarised as a 50-kilometre radius from an Australian Capital City or a 35-kilometre radius from Australia’s Major’ city, usually those having a population of over 100,000 people or greater, of which there are roughly 17 cities available in the 8 States/Territories of Australia. The cities that fall within those areas, with a vacancy rate of below 1%, usually show us the rental demand statistics that we are seeking to encourage our investors to consider purchasing in that area. 

The bank has to like it, too

If looking to borrow money through your SMSF to assist in purchasing your property, the bank has some say in it, too. They would prefer the property to be as new as possible as these properties generally have the lowest ongoing maintenance costs and are typically still held under a builder’s warranty for major structural components. They have a higher rental demand, they have greater tax depreciation benefits, as well as, the most probable increased resale value. 

Purchasing a newly completed property with high-quality construction, within an area of high demand, will provide an investment opportunity that not only has high tenancy rates, but also a low probability of continuous costs to you as the owner.

Positively geared 

The property must be at least cash flow neutral, but ideally, cash flow positive, meaning that the rent per week is more than every single one of the outgoings to the property. This is easiest summarised by seeking a property that has a 4.8% rental yield or greater. This means that you must receive a minimum of 4.8% of the amount you purchased the property for in rent each year.

This statistic alone makes it very difficult to be able to choose an investment property in cities like Sydney and Melbourne, where the average rental yield is below 3%. However, places like the Sunshine Coast, Brisbane, Gold Coast, Newcastle, Adelaide and Hobart are just a few examples of cities which offer an abundance of opportunities that meet this criteria. 

No personal gain

The final thing to consider is that you must have no personal gain from the property, meaning that you can never live in it nor can never have it rented/tenanted by anybody that you are knowingly aware of. You can never complete any building maintenance or repair work yourself; it must be done through a licenced third-party tradesperson. You cannot rent the property out for yourself; this must be done through a licenced third-party agency and

lastly, you cannot develop or improve the property. You can restore it and maintain it to its original state, but you cannot subdivide, build a second storey, create a granny flat, turn it into units, so on and so forth. 

These regulations are what make finding a property to purchase through your self-managed super, both the most exciting, but most usually the most frustrating part of the process. The reason Corbwood & Associates has grown so quickly and been fortunate enough to help 1000s of Australian families is that we have a system that separates those that you can consider purchasing from those that you can’t, making it a little easier to decide on exactly which dwelling is the right one for you if this is a path you ever decide to explore.

To understand more about buying property through self-managed superannuation ask questions about your personal circumstance or simply to find out if you qualify to do this, contact us on 1800 OUR SMSF (687 7673).

Related Tag: Using Super to Buy a House Australia

Self Managed Super Funds Loans And Lending Options

Self Managed Super Funds Loans And Lending Options

Understanding the different lending options for buying a property with super fund can be difficult and incredibly complex, especially if you intend on using your fund balance as the deposit. That doesn’t mean it can’t be done;  you just need to get the right advice and access the finance option that’s right for you. 

To help you navigate the pitfalls, we recommend engaging the help of the professionals at Corbwood & Associates. We can walk you through the process of residential and commercial investing through your SMSF. 

Can I Buy Property Through Any Super Fund?

First things first, you need to ensure your super fund allows you to invest in property. Currently, only self-managed super funds can be used to invest in property. 

The primary purpose of any superannuation fund is to grow your contributions through investments. 

The idea behind an SMSF is that you have control over how those funds are invested.  Rather than invest in stocks or bonds, you can choose to invest in residential or commercial property. 

Self Managed Super Fund Property Loan

You are not required to have the full value of the property when buying an SMSF investment property. There are lending options for buying a property with your super whereby you can apply for finance for the residual balance. However, most lenders will require your SMSF to have at least 30 percent of the value of the property as a deposit. 

These types of loans are known as limited recourse borrowing arrangements (LRBA) and are incredibly complex to set up with strict rules applied. This is where highly experienced financial services provider Corbwood and Associates can help. 

LRBA loans are designed to limit the actions of the lender should the repayments on the loan not be met. In short, an LRBA protects your other assets linked to your SMSF from being seized. To achieve this, a separate trust and trustee, known as a custodian, is set up.

Which Lenders Offer LRBA Loans?

Due to the small profit margins and complications involved with LRBA loans, not all banks or lenders offer them. Those that do often levy high-interest rates, and the market is constantly shifting with regards to who will offer these loans. 

Engaging the help of Corbwood and Associates means your lending options for buying a property with your super are carefully scrutinised and chosen competitively.  

Corbwood & Associates, We Streamline Investing With Super

Avoid unnecessary stress and delays in investing – trust us to secure your SMSF investment finance at a competitive rate. Keeping you compliant and your financial future secure is our speciality. 

At Corbwood and Associates, our team is made up of fully qualified and licensed professionals who understand your needs. 

We are passionate about providing quality advisory services for:

  • Property investment via self-managed super funds.
  • Refinancing and first time home loans.
  • Property investment advice and wealth creation strategies.   

Contact us to arrange a consultation and learn how we can help secure your financial future.

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