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Self Managed Super Fund Property

St Leonards Apartments

A Self Managed Super Fund is a great vehicle to buy property in readiness for a comfortable retirement!

Many people have created a Self Managed Super Fund (SMSF) to better manage their retirement savings plan. This is a great idea when you have the time or an advisor to guide you through the extra paperwork that needs to be filed. Properly managed, an SMSF is a great vehicle to build wealth for future use.

However, many super funds have no property – or only one property – held by the underlying trust. Considering the cost of setting up and maintaining the fund, this could be a waste of the fund’s reserves. The whole concept of the fund is to increase wealth over a long period of time. The fund is under the control of the trustee(s) rather than a large third party super fund.

Super funds are split into two “phases”: Accumulation and Retirement. It is critical to ensure that the accumulation phase is as productive as possible. It is worth noting that there may be a short period where the fund transitions and both phases are active. The advice is always to maximise the accumulation!

St Leonards Apartments suitable for a Self Managed Super Fund
Apartments in St Leonards

Property held in a Self Managed Super Fund

Holding property long term in a fund is a great way to grow wealth over a longer period of time. Although a quick gain in equity may be made, some of that gain will be lost in taxes along with the cost of selling the property. Therefore, consider holding the property longer and using the rental income to pay down any loan required to purchase the property. The goal should be that the property is debt free, before you move into the Retirement Phase.

Many funds bought townhouses in the outer suburbs of major cities which at the time was a great strategy. However, there are some great value studio or one bed apartments close to the city that provide a good rental yield. This market, especially on the Lower North Shore is running red hot at the moment!
It is worth noting that with the current infrastructure boom around Sydney’s North Shore, the ability to rent out an apartment held by an SMSF is strong.

Financial Advice

It is critical to get advice when managing a fund of any kind from a licenced advisor. For advice on starting or managing a Self Managed Super Fund, please talk with our financial advice partner: Apexx Wealth.

Finance Broker – Self Managed Super Funds

Madison Wells Pty Ltd trades as Astute St Leonards, a specialist in providing loan structures for Self Managed Super Funds. There is a growing competitive market within the lending community for these types of loans. This is putting pressure on interest rates and loan policy – to the benefit of the fund and guarantors.

Property Buyers Agent

Stephen Wells, our MD, is also a registered Buyers Agent in NSW. He has access to a wide stock of apartments on the Lower North Shore with rental yields in the 5%-7% range (based on a 60% Loan Value Ratio). Talk to Stephen about the opportunities on the Lower North Shore by booking some time here.

In summary, a Self Managed Super Fund is a great vehicle to build wealth for your retirement. With opportunities to purchase in suburbs close to new public transport infrastructure, any SMSF will benefit from buying now!

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Making Money in Commercial Property Through a Self-Managed Super Fund

Some of the most important decisions a business owner will make are about their premises: whether to rent or buy, where to base the business and even the style of the property are important to get right. For those with a Self-Managed Super Fund (SMSF), there is one more option to consider: landing business premises and an investment property at the same time. This is a topic that all business owners should take some advice on.

Figuring out whether  buying your commercial premises through your SMSF is an option that’s suitable for you is imperative to the success of your investment. There can be many gains through purchasing commercial property through your SMSF, including creating a certain level of freedom by smart use of resources. It frees up capital for the business owner and they are unlocking super to do more for them.

Further to this, the property is protected against insolvency. Depending on the type of business, this can be particularly appealing. There’s a tremendous level of protection of assets within super, so it ticks the asset protection box for a lot of SMEs that may be subject to litigation due to the nature of what they do.

Then there are the tax benefits. While it is in accumulation phase, income tax is only $0.15 in the dollar. In retirement, as the law stands, its zero. This means that the money accumulated in an SMSF through the investment does not get taxed.

On the flip side of the shiny self-management coin, Astute St Leonards offers a word of warning regarding the obligations. There is an absolute element of responsibility on compliance matters. You are the trustee of an SMSF and you need to understand what those responsibilities entail and we recommend taking specialist advice from your financial planner.

You must pay commercial rates for rent through a prearranged lease agreement and, although having a protected asset is great for some businesses, it also means that equity is locked within the fund. You can’t take earnings elsewhere. 

Having an SMSF means you can’t give all of this work to someone else to do for you, but you can seek advice. Astute St Leonards has access to a very successful financial planner that forms an integral part of our team. Call us today to get the advice that will help your business grow.

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Improving Your Wealth with a Self-Managed Super Fund Loan

Many savvy investors run a portfolio of investments to balance the ebbs and flows of interest rates, the stock market and other asset fluctuations. One area that is very popular with these investors is a Self-Managed Super Fund (SMSF). The idea behind them is that it gives the investor more control over the fund and its related assets, namely property, shares and cash.

Several years ago, all the big Banks lent money to these funds to acquire property assets as part of the fund’s portfolio. However in recent years, the number of lenders has shrunk considerably with St George, the Commonwealth Bank and AMP, for example, pulling out of the new SMSF lending market and trying to retain their existing customer base.

At Astute St Leonards, we are working with two of the remaining lenders, Liberty and La Trobe Financial to refinance loans from the other lenders. The many reason for this is that the interest rates at the original lenders has remained up over 6.00% whilst new loans can be written from around 4.35% Principal & Interest with a 0.5% increase for Interest Only loans. These rates are based on the lenders risk assessment and the Loan Value Ratio – i.e. the size of the loan compared to the estimated value of the property.

SMSF loans are a little tricky compared to normal home loans in that the property acquisition is done by the fund – and the fund is a trust company with the owners acting as a trustee of the fund and as such the guarantor of any loan. So that means that the loan is taken on by the SMSF not the actual person who is the beneficiary of the trust.

This means a little more paperwork as both the trustee (guarantor) and the fund have to be tested by the lender for serviceability. This takes a little longer to go through as the lender works through all tax returns, accounts and income sources, for example, rental income from the property.

At the time of writing, Astute St Leonards is working with seven groups of trustees moving their SMSF loans to a new provider and saving up to 2.00% on their rates. By switching to a Principal & Interest loan from an Interest Only loan also reduces the capital so the fund retains more equity and therefore grows faster.

If you have property in your Self-Managed Super Fund and your loan is currently over 6.00% then talk with us and we will provide a free analysis of the costs to make the move, as well as an estimated new payment amount with the short, medium and long term savings to be made – it might be that the savings kick in during year two of a new loan simply because the break costs are very high from your existing lender.

Astute St Leonards will work with your financial planner to ensure that all parties are aware of the analysis and we will work collaboratively to ensure that the benefits are known prior to any decision being made.