Why Mums Might Consider Buying Property Through Their SMSF

For many mums planning their family’s future, investing in property through a Self-Managed Super Fund (SMSF) can be an appealing choice. This approach not only helps in saving for retirement but also gives you control over where your money goes. Here’s a simpler breakdown of why this might be a smart move:

1. You’re in Charge.

Think of an SMSF as a personal savings pot that you and, potentially, your family control. You get to choose what type of property to invest in, whether it’s a cozy house, air BNB or a commercial space. This means your investment can grow in a way that fits your family’s needs and goals.

2. Investing in “brick and mortar”

For you, considering your family’s financial future, investing in brick-and-mortar through an SMSF can offer a sense of security. Real estate is typically less volatile than stocks or bonds, meaning it doesn’t swing wildly in value.

3. Save on Taxes.

When you buy a property through your SMSF, the money you make from it, like rent, is taxed less than your usual income. The maximum tax you pay is 15%. If you sell the property after 12 months, you only pay a 10% capital gain tax. Even better, if you decide to sell the property after you retire, you might not have to pay any taxes on the money you make from the sale. This can add up to more savings and more money for your family.

4. Mixing Things Up

Investing in property can make your overall savings and investments more diversified, which potentially, is less risky. Property often doesn’t go up and down in value as sharply as other investments like stocks. So, if the stock market is a bit of a roller coaster, having property might keep your overall savings steadier.

5. Grow Your Savings

Properties in good locations might increase in value over time, which means your investment could grow more than it would in a regular savings account. This growth is key, especially when thinking about a comfortable retirement.

6. Borrow Smart

Your SMSF can borrow money to buy a property, which might allow you to invest in a property that you cannot buy upfront with your super. The leverage is a way to potentially increase your returns, but remember, borrowing also adds a layer of risk.

7. Plan for the Future

SMSF can make it easier when it comes to passing on your wealth to your children. The setup of SMSFs can help streamline this process, potentially with some tax perks.

8. Stable Rental Income

If you invest in property, and rent it out to a reliable tenant, can mean regular and stable rental income, which will cover the SMSF expenses and add to your future retirement savings. If you invest your super in commercial property, you can even rent it to your business.

9. Live in the property.

You or your relatives can not live in the property owned by the SMSF. However, SMSF can sell property to yourself or you can transfer the property out of the SMSF when you retire and live in it.

Things to Keep in Mind

While buying property through an SMSF has its perks, it’s not all smooth sailing:

•  Follow the Rules: There are strict rules and regulations about what you can and can’t do with your SMSF investments. It’s all about making sure that the investment benefits your retirement.
• Cash Flow Issues: Properties can be costly to maintain if you need repairs or if it is untenanted for some reason.
• Takes time to sell: Properties are not quick to sell if you need cash fast.

Make sure this won’t be a problem for your family.

•  Changing Property Values: Just like any investment, property prices can go up and down, depending on many factors like the economy or local market conditions.
• Running Costs: Managing an SMSF and a property takes time, effort, and money. Think about costs like repairs, taxes, and insurance.

Conclusion:

Buying property through an SMSF can be a great option for mums looking to grow their retirement savings and have more control over their investments. It’s important, though, to get good advice from the SMSF expert and think carefully about how it fits into your family’s overall financial plan. With the right approach and careful planning, it can be a beneficial move for securing a comfortable retirement.