Using your super fund to buy property…

78% of Australians will not have enough money to retire on!

Are you headed for a superannuation disaster? Millions of Australian’s have watched in shock as their retirement dreams have gone up in smoke.

Let’s face it superannuation returns in general have been dismal over the last few years.

When it comes to investing your super money you only have two options;

  • 1. Leave it up to the superannuation fund managers and hope they do a good job
  • 2. Set up a self-managed super fund and control how your money gets invested

I’d say most people don’t like losing money and that’s probably why more and more are looking at setting up their own self-managed super fund these days.

And in this current climate property investors are perfectly placed to take back control of their super, growth their wealth and retire earlier.

Purchasing residential property using your self-managed super fund is very appealing now that super funds are allowed to borrow to buy property. This ability to leverage in your super fund gives you the scope to make greater returns as your property increases in value over time.

Another great option is to use your super money to buy a stake in a commercial property via a property syndicate [which is just a fancy name for a small group of people who buy a property together using a unit trust.]

This option is preferred by some people as it gives them the chance to own a stake in a large commercial property with potentially better income and capital growth prospects, not to mention future development potential in some cases.

To give you an idea of what I’m talking about I’ve included the following recent real-life client case study;

Our client was presented with a commercial property investment opportunity through an Accountant. The property was in a prime location, generated good income and had excellent future capital growth potential with the option of further development down the track. The property was due to be purchased via a unit trust and our client was given the chance to purchase one of ten available units in the trust – giving him a 10% ownership of the property.

Here’s an outline of how the numbers work…

Property Value $2,000,000 Property Expenses
Stamp Duty etc. $100,000 Trust Loan Interest @7% $91,000
Total Cost $2,100,000
Property Income
Trust Loan [70% LVR] $1,300,000 Commercial Rent @7.5% $150,000
Shortfall/Investment $800,000 Net Income $59,000
Unit Holder Investment $80,000 Unit Holder Income $5,900
[1/10th of total investment] [1/10th of total income]
15 Years Later Property Expenses
Trust Loan Interest @ 7% $0
Capital Growth 5% p.a.
New Property Value $4,000,000 Property Income
New Commercial Rent @ 7.5% $230,000
*Loan has been paid off!
Trust Loan $0 Net Income $230,000
Unit Holder Value $400,000 Unit Holder Income $23,000
[1/10th of total value] [1/10th of total income]

In order to purchase this property each unit holder had to contribute $80,000. Our client simply had an Accountant set up his self-managed super fund and then he used $80,000 of his super funds to buy one unit in the unit trust. Note: All unit holders agreed at the start that all income generated from property would initially be used to pay down the initial $1,300,000 trust loan.

If we project forward 15 years the property has doubled in value [we’ve only assumed capital growth of 5%] and the original trust loan has been repaid in full. The net result is our client’s initial investment of $80,000 is now worth $400,000 – in addition he can now expect to receive an income of ~$23,000 p.a. which will continue to increase year after year as the commercial rents are increased on an annual basis.

A great result you would agree, particularly when compared with the returns most super funds are dishing up these days.

So how can we help you?

We can put you in touch with the right people to set up your own self-managed super fund and help you get access to similar types of commercial property investment opportunities. We’ve also got you covered if you want to borrow money in your super fund.

So if you currently have more than $50,000 in your super fund and are interested in investing in property via a self-managed super fund then call or email us for a friendly chat.

Your Partner in Success,

Sam Cocks
Managing Director
Urbantech Group

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Urbantech provides a complete service to build and protect your wealth; mortgage & finance broking, +plus a range of allied services. Simply put we'll make sure you get the best deal going. To get started today book in your FREE Finance & Wealth Evaluation or call us on 08 8451 1500

1 Comments to “Using your super fund to buy property…”

  1. Great idea of buying property using super fund.

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