6 Common Mistakes Made When Buying an Investment Property in an SMSF

I‘m always on the lookout for articles with the potential to positively change a business. What’s your take on the following points I came across recently?

More and more investors, and particularly Baby Boomers, are using their Self-Managed Super Fund (SMSF) as a vehicle to buy an investment property.

1. DEBT

Your Self-Managed Superannuation Fund (SMSF) can borrow money to:

a) Purchase a property (including all acquisition costs),

b) Pay for repairs and maintenance and

c) Capitalise interest.

You cannot use borrowed funds to improve the property.

Improvements include additions, granny flat, extensions etc.

For these activities cash resources of the fund must be used.

It is critical to keep good records in your SMSF to identify whether borrowed funds or internal cash is used.

When debt is used, the property must be held in a Holding Trust with a Corporate Trustee and not directly in the SMSF.

Apart from the legislative requirement to not hold the property in the SMSF there are real and practical reasons why you would not want to hold it in the SMSF.

I’d be really interested to know your opinion. Check out the full article here and then I’d be happy to discuss with you by phone (0400) 032-110 or email [email protected].

Thanks,

Bill Mitchell