It seems everywhere you look at the moment there are people and businesses proclaiming the benefits of investing in property using a Self-Managed Super Fund (SMSF). SMSFs have definitely grown in popularity with property investors, especially since regulations changed in late 2007 allowing funds to borrow money to invest.
This change essentially created a massive pool of money that many property developers and marketers want a piece of. With many companies claiming they can help investors set up a SMSF and manage the entire purchase process, it’s important that investors stay vigilant and put their trust in the right people.
The problem lies in the fact that these promoters will often have either direct or indirect links to a developer who is looking to sell property new or off the plan. On the surface, this property may seem to stack up as a good investment but the reality is, this is often not the case.
While SMSFs are a financial product and heavily regulated, property investment advice isn’t. This means that just about anyone can advise you on where and what to buy without worrying about the consequences.
A risk for investors with a SMSF is that their “advisor” hasn’t bothered to understand the investor’s broader financial circumstances and long term goals, making it impossible to determine whether or not the investment decision makes sense. The risks that come with obtaining inadequate advice are significant, especially when the advice involves a SMSF.
Property investing with or without a SMSF is a significant step and it’s important to get the right advice from the right people. Investors should seek appropriate specialist financial and legal advice to set up a SMSF, then a property investment expert to help identify and secure the right type of property. A finance broker should be employed to assist with obtaining finance and ideally a property manager would take the responsibility for the management of the property.
Investors should also be aware that investing via a SMSF can be quite complex and take longer than it would buying property outside of a fund. So it’s important to get reliable, independent advice before making an offer on a property. And this advice must be consistent with your plan for retirement. Your property advisor should understand your financial obligations and what you want to achieve in retirement before discussing what types of investments can provide for that goal.