Thinking about investing in property with your super? A Squirrel short guide. - Squirrel

Thinking about investing in property with your super? A Squirrel short guide.

A lot of people consider property as one of the safest investments among all the growth assets. Other benefits are:

  • It can be easier to manage than other growth assets
  • Having tangible, hard assets
  • Potential rental income  
  • Tax benefits
  • Potential for capital growth
  • Alternative way to utilise your super
  • Tax deductible expenses
  • Save on capital gains tax
  • Achieving home ownership

Is an SMSF investment property for you?

To help you work out if an SMSF investment property is for you, consider the following key points:

Look at all the factors impacting on the property’s value

You can make a better decision about your potential investment once you have researched the factors impacting on the value of the property, and the potential for capital growth. For example, purchase history, future supply and demand for the area, relevant legislation, and condition reports ought to be taken into consideration.

Will it benefit you financially over the coming years?

A realistic assessment of how much it will cost you now and over time needs to be compared with any potential earnings from renting or selling it.

Rental returns

Your rental income will depend on the condition, location and size of your property, as well as the amount of time the property will be leased to a tenant, and the times it will be vacant.

Buying an investment property with your super – the rules

The Australian Government has developed legislation around SMSF investment properties that you need to be aware of before deciding on one. The Australian Securities and Investments Commission (ASIC) notes that an SMSF investment property must comply with the following rules:

  • Must meet the ‘sole purpose test’ of solely providing retirement benefits to fund members.
  • Must not be acquired from a related party of a member.
  • Must not be lived in by a fund member or any fund members’ related parties.
  • Must not be rented by a fund member or any fund members’ related parties.

When it comes to SMSF investment properties, Squirrel will help you stay compliant with the ATO’s and ASIC’s rules and guidelines. Simply call us on 1300 500 499 to get the ball rolling.

What sort of property should I look for?

Location, location, location! Real estate values are a result of supply and demand, which is key to your property investment strategy. Be aware that demand in areas can also fall as much as it can increase. Essentially, consider properties that will be easy to rent out. Key indicators of this are:

  • Availability of public transport
  • Condition of the property & facilities
  • Proximity to places of work, shops and schools
  • High-demand location
  • Surrounding area – safety, noise and pollution levels
  • Population growth

Why should I invest in property with my SMSF?

A lot of people consider property as one of the safest investments among all the commodities. Other benefits are:

  • It can be easier to manage than other commodities
  • Having tangible, hard assets
  • Potential rental income  
  • Tax benefits
  • Potential for capital growth
  • Alternative way to utilise your super
  • Tax deductible expenses
  • Save on capital gains tax
  • Achieving home ownership

And the tax benefits?

Having an investment property in your SMSF can present you with some significant tax benefits. Such as:

  • Your super fund will be taxed at 15 per cent – this is considerably lower than personal tax rates.
  • Much lower capital gains tax if the property is sold before retirement. In this scenario, a normal investment property may attract as much as 46.5% capital gains tax, while an SMSF investment property may only attract 10%.
  • Once you are retired, there will be ZERO capital gains tax on your SMSF investment property.

Would I need a property manager?

All costs and expenses associated with your SMSF investment property need to be paid for with your SMSF money. Having a managing agent will save you time and make it easier to stay compliant with the law. In addition,  a property manager will:

  • Take care of finding new tenants, the lease, rental collection, maintenance and inspections
  • Agents usually charge you a fee of around 6-7% of the rent you receive from tenants, which needs to be factored into your costs and can be offset against the rent.

How can a Squirrel home loan help me with my SMSF investment property?

  • Getting a loan from Squirrel when you already have a Squirrel SMSF, will greatly help with speeding up the settlement process.
  • It will also help you save time with your loan application as we already have all the paperwork needed to secure your loan with your SMSF, providing you with a much better chance of getting the property you want.  
  • Squirrel offers you fixed interest as well as variable interest loans.

Fixed or variable interest – what’s right for me?

Think about what’s important to you. In very simple terms, it can be looked at like this:

  • I like the security of having to pay the same amount all the time = A fixed interest loan is for me.
  • I feel confident that I can handle fluctuating interest rates and would like to make additional repayments when I have the money = A variable interest loan is for me.

Count me in. I would like to apply for a home loan with Squirrel. What do I do next?

Simply contact the Squirrel team on 1300 500 499 or click here to start. 

Our dedicated home loan specialists will help you make the most of your SMSF.

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