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What you should know when buying a property through super


Buying an investment property with your super is becoming a popular investment strategy. If you’re searching for it on the internet, you’ll likely be bombarded with every service, idea and success story under the sun.

There are two different ways of buying a property with your super fund. Both methods require that you set up a Self-Managed Superannuation Fund.  The easiest way is to have sufficient money to buy the property outright.  The alternative method is to borrow money to buy the property. For the latter you’ll need at least a 30% deposit and a more complex superannuation structure called a Bare Trust (or custodial trust).  There is a legislated method of how to do this so it’s best to have a financial planner to guide you through the process.

Buying a property in your super is very similar to buying a property in your own name in that you have to consider what you can afford, the time frame you have available, your comfort with long term investments and the potential risks that come from being an investment property owner. However there are a few extra things that you need to consider that we share below.

Don’t skimp on structure

A Self-Managed Superannuation Fund can be a complex beast requiring a lot of paperwork.  The quality of your documentation will influence how well your fund runs, so it’s worth investing in the set up, accounting, auditing and administration of your fund.

Pick the right property

This might seem obvious, but you’re investing your superannuation for profit, not to make you feel good. Don’t buy a property based on where you live and your personal preferences. Buy on where you’re going to get profit with a level of risk that you feel comfortable with.

Triple check your cash flow

You super fund’s income is made up of the contributions that you’re putting in so make sure that you’re getting sufficient yield on your property to make it work.  A waterfront property may be a unique prospect, but if the yield is too low, your super is going to run out of money. Borrowing in super is also more expensive, so this just exasperates the issue.

Diversify

If you retire and you’ve got lots of property, you have to pull out at least 4% of your fund balance as a pension. If you’re overall net yield is below this, you’re going to run out of money and be forced to sell a property to maintain compliance in your fund. Ensure that you have sufficient cash and/ or other assets to meet your pension needs and avoid being forced to sell below expectations.


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Our response to limit the spread of COVID-19

  • As COVID-19 continues to spread, we would like to take a moment to let you know what Financial Spectrum is doing to respond.

    While we haven’t been directly affected with any confirmed cases, we are taking all reasonable precautions to remain safe.Our priorities are:

    1. Keep our staff and clients safe
    2. Stay fully operational in our service delivery and continuing to manage your financial affairs
    3. Play our part in minimising the impact on our community against the spread of COVID-19

    Financial Spectrum has the technology, infrastructure and systems to continue business as usual remotely and our staff will now be working from home.

  • You should notice no change to our service, with the exception that we are encouraging our clients to meet via video call, rather than face to face, unless requested. We will be contacting all clients with meetings booked over the next two weeks with instructions for a video call.This is an evolving situation and we will continue to monitor developments. We will keep you informed of any material changes to our approach.

    These are unprecedented times and we understand that many of you will be feeling unsettled about your finances. We would like to assure you that we are open for business and are here to help you. If you don’t have a meeting booked but would like one, or if you have questions, please contact us at info@financialspectrum.com.au or on
    02 8238 0888

Brenton Tong

Managing Director

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