Invest for the long-term
Buying a house isn’t like slinging stock on the exchange. There are big upfront costs and you’ll often benefit from sticking the investment out over time. Despite continued growth in Australian property prices over the last two decades, property is still considered a high-risk investment. Borrowing to invest is even at higher risk, so you need to make sure you’re making the right investment decision.
The safest bet for property investments through your SMSF is the long-term strategy. Not only could you use the great tax incentives to your advantage – such as lower tax on capital gains and rental income (down to 0% in some circumstances) – you could also maximise negative gearing benefits. Plus, in the event of a downturn, you’ll be able to wait it out until the market picks up again.
If you’re thinking of retiring within ten years, investing in property through your SMSF might not be for you.
Diversify your portfolio to protect from losses
High-risk investments can pay off the most if you play your cards right. However, a market downturn could be disastrous to your fund if you don’t have the right mix of assets. While a couple of high-risk investments are great, diversifying your assets is highly recommended. That way if one of your investments turns sour, the rest of your SMSF’s assets will be shielded.
By diversifying your SMSF to include an investment property, you could protect your fund from losses to one of your other asset classes. On the flip side, it’s unwise to use all of your fund’s assets to purchase a property.
If your fund needs to borrow to purchase a property, the loan will be a limited recourse loan. Should you have to default during a market downturn, your other SMSF assets are protected from creditors.
Take control of your super
While managing a SMSF may seem like a daunting task, rest assured that many people have been in this position. With almost one-third of Australian super held in SMSFs, regular people like you are growing their wealth and making their own decisions about their retirement
For more information about SMSFs, download our free SMSF Guide to investing in Property eBook or Information Package today. If you're interested in investing in property through an SMSF, ESUPERFUND helps make it easy, with a fast, streamlined process. And if you act now, ESUPERFUND is offering a Special Free Offer! Click here for details.