SMSF: Your Foolproof Guide to Buying Properties in Australia

Real EstateReal estate will always be a great investment for anyone, whether you're married or single, young or old, or a big corporation investor or a small-time business owner. The property is yours to keep and yours to sell as well, depending on the negotiations you had with your agent. 

If you're nearing retirement, would you still want a new property? Some do, while others don't. Buying SMSF property in Australia seems to be the best move, but you have to know what you are getting into.

Understanding SMSF

SMSF means self-managed super funds, and this, by far, is the largest sector in Australia. Because SMSFs can borrow money to buy property, it has given people more leeway to invest in properties they initially couldn't afford. Thus, it has been proven to be beneficial for business owners because they can use that same property for their enterprise. However, rents and the appropriate fees must be paid.

The Application for SMSF

Know how much money you need for the SMSF. It must be clear to you, however, that you can only borrow what you can afford. In most cases, SMSFs borrow close to 80% of the value of the property. You, in turn, should have at least half of the deposit ready. 

If you're short on funds, you can use your salary contributions, tax-deductible personal contributions, and guarantee payments to cover the loan. Add an accountant and other consultant fees, as SMSF requires thorough auditing. Other charges include legal and upfront fees, bank fees, stamp duty, and property management fees. You should comply with Australian policies and regulations regarding the purchase of a property, as well.

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The rules are relatively strict for SMSF. For example, the property must not be acquired from a relative of the member, neither must it be occupied or rented by a fund member.

Buying a property through SMSF is fine if you are ready for the higher costs and the tedious paper trail. You should likewise maintain a smooth cash flow to ensure that you can repay the loan. Be mindful of how you are going to acquire the loan, as you cannot simply cancel arrangements.