Top tips on managing your own super fund investing

If you’re approaching or enjoying retirement and have successfully tackled the sizeable feat of managing your own super fund, chances are, you’re no stranger to the idea of investing your hard-earned savings to ensure financial freedom.

Commercial property experts, Burgess Rawson, have noted this is certainly a growing investor demographic as Australians approaching retirement increasingly recognise the benefits of property investments as a savvy way to bolster their financial security post-working life and ensure the most bang for their buck.

According to Burgess Rawson Principal, Pat Kelly, the company has transacted over $100 million in commercial property sales to SMSF investors in the past 12 months alone, but notes there are a myriad of factors to consider before signing the dotted line and becoming the next real estate tycoon.

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While the property investing fundamentals remain, Mr Kelly cuts the labyrinth of jargon and acronyms that is self-managed super fund property investing, sharing his top tips on what to consider with this specific property investment option:

Know how to borrow – Those looking to expand their property portfolio via their super account must do so through a ‘limited recourse borrowing arrangement’. This is a type of gearing that allows the investor to purchase a single asset, like a residential or commercial property. While geared property investment represents an attractive opportunity, it also comes with its share of risks, including higher costs, difficulty in cancelling the loan, possible tax loses from the property, and the inability to make significant alterations or renovations to the investment.

Consult an expert – there are various interesting tactics available that make for strategic property purchases with an SMSF, such as purchasing your business premises, allowing you to pay rent directly into your fund at market rate. Commercial property experts can guide you on additional options here, so it’s certainly worth seeking personalised advice.

 Play by the rules – This means not buying the property from a person related to the superannuation member, not living in the property or renting it out to a relative, as well as meeting the ‘sole purpose test’ of only providing retirement benefits to fund members.

Choose property wisely – When deciding on the type of property asset that will best serve you in retirement, it is important to consider both the financial and non-financial benefits on offer. For example, fast-food and childcare asset classes have proven extremely popular amongst SMSF investors in recent years, mostly due to their affordability and availability. However, other investors prefer an easily managed ‘set and forget’ purchase generally achieved through long-term lease arrangements that can offer attractive long-term financial gains without significant property management from the buyer.

Know the costs – There are many hidden fees and charges which come with the territory of SMSF property purchases. Knowing all the upfront, legal, advice, ongoing property management, and bank fees are imperative for anyone looking to preserve their precious super balance, before they are in too deep. To best ensure you are correctly informed, only take SMSF financial advice from a verified Australian Financial Services (AFS) licence-holder.

Ensure your insurance is complete and up to date – The benefits of adequate insurance for any investment decision are obvious, however when it comes to SMSF, taking out appropriate insurance is vital. SMSF property investment demands enough cash flow to cover loan repayments, and having the buffer provided by appropriate income, life, and TPD insurance ensures your obligations through the life of the loan can be met, come what may.

Recognising the importance of these five aspects of SMSF investment will ensure a firm foundation from which to launch your foray into the real estate market or look to expand your property portfolio with a new asset.