Using Super to Buy Investment Properties in Melbourne property market has seen spectacular growth in recent years. This has lead many investors to include property investments in their SMSFs. Setting up an SMSF to invest in properties is a complex and highly regulated process. It’s always best to seek professional financial advice before committing.
One of the most popular ways to use super for property investment is by leveraging or gearing your SMSF. This involves using SMSF funds as a deposit to secure a loan that is used to buy an investment property. The property’s rental income is then used to pay back the loan and future SMSF contributions. In order to purchase a property using your SMSF, the trustee must obtain the necessary approval from their bank or lender under a Limited Recourse Borrowing Agreement (LRBA).
Supercharge Your Investments: A Guide to Using Super to Buy Investment Properties in Melbourne
Before making any investment decisions, you should first speak with an accountant and financial adviser who specialise in SMSFs. An SMSF is a tax-free entity that holds more than $2.9 trillion worth of assets, which is predominantly real estate. However, the Australian Tax Office requires that you meet certain compliance standards and adhere to strict laws when purchasing property in your SMSF.
In addition, the property you choose must be located in an area with high rental demand. This typically includes areas within a 50-kilometre radius of an Australian capital city or 35 kilometres of a major city. It’s also best to buy new properties, as they tend to have the lowest ongoing maintenance costs and are usually still under builders warranty.