Many investors are choosing to return to the property market, given the recent interest rate cuts.
An increasing number are choosing to invest through self-managed super funds (SMSFs), but it is important to first get financial advice.
Borrowing through an SMSF is not as straightforward as a normal home loan and comes with much stricter rules. SMSFs are limited recourse loans, so in case of default, the bank can access the investment property and any other property securing the loan.
The two most important rules to note with purchasing property in SMSF, according to Quantum Financial principal adviser Claire Mackay, are:
• Property purchased through an SMSF cannot be lived in by you, any other trustees or anyone related to the trustees, no matter how distant the relationship.
• Don’t buy a "renovator’s delight". Borrowed funds can be used for property maintenance but cannot be used to improve a property.
To ensure a safe entry into property investment with an SMSF, Mackay says it pays to get professional advice, plan an exit strategy and make sure it’s the right fit for your investment portfolio. “You need to diversify the risk,” she says.