All Topics / Help Needed! / Using SMSF to buy residential property

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  • Profile photo of DebbieDebbie
    Join Date: 2015
    Post Count: 0


    Husband and I are debating if we should contribute more (~$25k each) to our Super Fund before EOFY.

    We plan to convert it into SMSF to buy residential properties once we have a total of about $250k (achievable mid-2021) but not fully convinced about the pros and cons.

    Where can we read more about using SMSF for this? Any self-help/-educate materials or books would be appreciated.


    About us:

    We are in our mid-30s and lucky still being employed with decent salaries during the pandemic. We are however passionate about property investing and husband wants to try out property development (part-time at the beginning) and the SMSF, along with our cash savings, may help to kick-start this transition.






    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    There is plenty of information out there. Perhaps start off looking at the loans available to SMSFs. The number of lenders is dwindling and the ones that do lend are making the most out of it with high rates and fees.


    Once the trustee has purchased property it cannot be leveraged against – the equity cannot be borrowed against so think of it has basically a one off purchase that you set and forget.


    Also consider the estate planning aspects if a member dies and their death benefits need to be paid out that would probably mean the fund has to sell to get the cash to pay out the member, and this could be costly in the early years and/or if there is a decrease in value.



    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide)

    Profile photo of InvestJon1InvestJon1
    Join Date: 2020
    Post Count: 3

    Consider the implications of leverage and risk.

    If you purchase with debt then the property must be held outside of the SMSF in a Holding Trust, but when the debt is paid off the property must be transferred to the SMSF.

    The transfer can increase risk in the SMSF in the case of litigation, which can expose all your SMSF assets.

    Therefore, you should consider either keeping a small outstanding loan or put in place a small member loan.

    It’s also important to consider that even with a cash purchase you should put the property in a trust which the SMSF “owns”.


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