Most Australians use a combination of availalbe cash and a loan to invest in property. Less than 4% use their Superannuation to buy property because borrowing in your Super wasn't an option.
Today, after the changing laws of September 2007, you can borrow in a Self Managed Super Fund (SMSF)!
Four advantages of a borrowing in a SMSF:
- tax benefit of negative gearing
- low, or even zero tax in the Super fund environment
- power of leverage
- magic of compounding
Types of clients:
- Owner occupiers: small business owners, professionals, medical professionals
- Investors: buy property to create long term capital growth
- Restructures (equity release)
Eligible properties:
1. Commercial Property
- Officies
- Factories
- Warehouses
- Showrooms
- Shops
- Medical suites
2. Owner occupied or investmentMetropolitan area
- Major central centres
- Population greater than 25,000
There are some exclusions:
1. Specialized Property
- pubs
- motels/hotels
- childcare centres
- caravans parks
2. Environmental Risks:
- Bulk chemical storage and firm
- Service stations
- Vacant Land
- Construction
Example of criteria from one funder:
- min. amount: $150,000
- max amount: $2 milions
- Qualifying property
- Rent must cover 80% of debt service
- SMSF must have assets at least for $100,000 in super
Some Case Studies: