Think be­fore us­ing su­per on bricks and mor­tar

The Weekend Post - Real Estate - - Front Page -

MUM and dad in­vestors are now tak­ing the plunge into self­man­aged su­per funds (SMSF) and buy­ing res­i­den­tial prop­erty.

Ac­cord­ing to agents, just a few years ago the idea of buy­ing prop­erty with su­per was un­heard of.

Now, the suit­abil­ity of a prop­erty to be part of an SMSF is fre­quently fea­tured in print and online ad­ver­tis­ing.

That means it is recog­nised as a buyer de­mo­graphic.

This is an in­ter­est­ing phe­nom­e­non be­cause it is an ex­tremely com­plex pro­ce­dure.

The process was orig­i­nally de­signed for the wealthy, with their pri­vate ac­coun­tants and lawyers on hand to help guide them through the maze. But the masses have found out about it.

Now there is help, in so many forms, for the es­tab­lish­ing of a SMSF. But this trig­gers a warn­ing in the back of my mind.

As with all good things – and I do be­lieve it is a good thing in prin­ci­pal – 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 but more a novel.

But I be­lieve the act of cre­at­ing an SMSF should have ab­so­lutely no links with who ad­vises you, or how and what prop­erty you choose.

As with any new or lat­est prop­erty fad, com­pa­nies 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. When you see a com­pany of­fer­ing a way through this leg­isla­tive maze for free or cheaply, how tempt­ing is that?

You need to ask ‘ what is the catch?’ be­cause there will be one. The catch may be that they help you cre­ate an SMSF then find a prop­erty for you, too. How con­ve­nient.

But is it the right prop­erty, or is it a house on which they make a huge com­mis­sion? To in­vest prof­itably in prop­erty in your SMSF, you need to ad­here to some ba­sic prop­erty in­vest­ing prin­ci­pals.

This means the prop­erty type, lo­ca­tion and en­try price is vi­tally 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 can af­ford, not on the pack­age that some­one wants to sell you.

This is not to say all of th­ese schemes should be avoided com­pletely.

I be­lieve the ad­vice on the SMSF and the ad­vice on the prop­erty pur­chase should be treated sep­a­rately.

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; speak to your bank, a lawyer. All th­ese pro­fes­sion­als may and will charge you, but you know ex­actly what you are pay­ing for.

It can cost sev­eral thou­sand dol­lars to cre­ate an SMSF.

But su­per­an­nu­a­tion is all about your long-term fi­nan­cial se­cu­rity and it is vi­tal it is han­dled cor­rectly by true pro­fes­sion­als.

For those with 10 to 20 years-plus of su­per, it could be well worth in­ves­ti­gat­ing.

And re­mem­ber, prop­erty should only be part of the plan.

With su­per­an­nu­a­tion – like all good in­vest­ments – you should al­ways be care­ful to spread your risk.

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