Australia Back to Real Estate News Homepage to RSS for this country

AU Property News

AU Super idea but beware of pitfalls

Property Here - Monday, October 21, 2013

Share to:

News Corp real estate journalist Andrew Winter.

News Corp real estate journalist Andrew Winter.

MUM-and-dad investors are now taking the plunge into self-managed super funds and buying residential property.

According to agents, only a few years ago the idea of buying property with your super was unheard of but now the suitability for a property to be part of a SMSF is frequently featured in print and online advertising.

This means it is now clearly recognised as a new buyer demographic. This is an interesting phenomenon because it is an extremely complex procedure, fraught with twists and turns to confuse.

The process was clearly originally designed for the wealthy with their private accountants and lawyers on hand to help guide them through the maze.

But while it may never have been intended to attract the masses, the masses have found out about it. Now there is help in so many forms - but this triggers a tiny little warning in the back of my mind. As with all good things - and I do genuinely believe it is a good thing in principle - the government may decide to up the ante and make it even trickier or totally unobtainable for normal people, or start to tax the living daylights out of it.

But right now I suggest we keep our heads down, work the system and benefit.

What property to select for an SMSF and how to establish an SMSF is not an article - more a novel.

But I want to share one very important tip that should aid the selection process. I believe the act of creating a SMSF should have absolutely no links with who advises you or how and what actual property you choose. As with any new or latest property fad, companies suddenly pop up claiming to specialise in that sector of the market.

This is absolutely no different to the "invest in property risk free'' schemes that made life so difficult for so many during the property boom.

You need to ask what the catch is. To invest profitably in property in your SMSF you need to adhere to some basic property investing principles. This means that the property type, location and entry price is important, as is the rent you can expect. The numbers need to stack up and the numbers will only stack up based on what you personally can afford, not on the package that someone wants to sell you.

Advice on the SMSF and the property purchase advice should be treated separately by consumers. To my mind, the best way to go down this path is to create an SMSF using your own trusted independent financial adviser. Get advice from your accountant or the tax office and speak to your bank or a lawyer. It can cost several thousand dollars to create a SMSF, but superannuation is all about your long-term financial security and it is vital it is handled correctly by true professionals.

Once you have established the fund you can start to select a property yourself using traditional search methods. A SMSF is something I plan to take the plunge on myself at some point, but as a relatively new resident to Australia our super is not at a point where it is worthwhile managing it ourselves yet.

But for those with 10 to 20 years or more of super it could be worth investigating. Andrew Winter is the host of Selling Houses Australia on Lifestyle. Follow him on Twitter @andrewtwinter