Most Australians have superannuation and most Australians aspire to own an investment property but did you know you can buy a residential investment property with your superannuation?
A SMSF, which stands for a Self Managed Super Fund, essentially allows you to administrate and invest your superannuation funds yourself. One of the major areas of interest in the last few years has been around setting up a SMSF in order to invest in residential property.
John and Kathryn came to us in 2015 with a combined total of $200k in their retail and industry superannuation accounts. They had become disillusioned with the sharemarket after the GFC and decided that they wanted to use these funds to set up a SMSF and buy an investment property instead. With advice from RELATE Financial Group and their accountant, John and Kathryn set up a SMSF and rolled their retail and industry super funds in to their SMSF’s bank account.
They found a great 2 bedroom unit in Sutherland NSW for $600k. John and Kathryn’s SMSF was able to borrow 80% of the property’s value and therefore borrowed $480k to fund the purchase. John and Kathryn’s SMSF was required to provide a 20% deposit ($120k) and approximately 5% for associated costs such as stamp duty, legal fees etc ($30k) – total $150k. This left them with approximately $50k in their SMSF’s bank account to act as a cash buffer in case of unexpected events such as loss of tenant or large maintenance expenses.
There were a number of benefits for John and Kathryn:
- Their retirement funds are now invested in an asset that they are comfortable with and can understand.
- Their asset value was $200k in their previous superannuation funds but now they have $650k invested in their SMSF (albeit with a $480k debt).
- Rent of approximately $500 per week being received
- Tax deduction for the interest pain on the SMSF loan.
- Tax deduction for depreciation on the property
Ultimately, John and Kathryn were confident that this strategy was going to provide the best financial result for them in retirement.
Can we help you too?
If you want to see if RELATE Financial Group can help you buy a property with your superannuation, please call us on 1300 123 145. Alternatively, you can email us at firstname.lastname@example.org and we will call you back at a time that suits you.
This article contains information that is general in nature and the example is illustrative only. It does not take into account your objectives, financial situation or needs. You need to consider your financial situation and needs before making any decisions based on this information.
This information is provided by Stephen Giles of Brat Invest Pty Ltd (ABN 14 164 048 766), trading as RELATE Financial Group; authorised representative and credit representative of Charter Financial Planning Limited, Australian Financial Services Licensee and Australian Credit Licensee.
RELATE Financial Group is a trademark of Brat Invest Pty Ltd.