If you have a self-managed super fund or are considering establishing your own super fund, you are now able to use these arrangements to help you buy a residential or commercial investment property.
There are several excellent benefits of utilising a SMSF loan as part of your funds investment strategy some of which are noted and explained on this page.
How Does a SMSF loan work?
Your SMSF wants to buy property (residential or commercial real estate) but does not have enough funds for the full purchase. The SMSF can now make an equity contribution on the property and borrow the remainder of the funds to complete the purchase.
Self-Managed Super Fund Loan Benefits
There are many great benefits of using a Self-Managed Super Funds (SMSF) to purchase Real Estate;
- Your SMSF can purchase property worth more than its available funds through the benefits of gearing.
- Assets in the SMSF are secure because the lender only has the right of recourse on the investment property, plus any additional security provided by the guarantor
- Your SMSF receives all income and capital growth even if the property has not been paid off.
- The loan is repaid using your superannuation contributions along with rental income.
- Interest expense may be claimed as tax deductions by the SMSF and potentially reduce your SMSF's tax liability.
Why are SMSF loans so appealing?
Many investors are using their superannuation money to purchase property, mainly because it gives them more control over their superannuation, and because a large amount of people have substantial funds in their superannuation which is just sitting in a fund. By establishing a Self-managed superfund you are not only using your superannuation contributions to pay into the loan, but also rental income, all whilst your property has the opportunity to inflate in value over time.