Are you prepared for retirement? Have you got an investment plan in place to provide for your golden years? If you haven’t sorted out an investment strategy to complement your retirement plan, then you might want to look into buying a rental property with self managed super funds loans.
Investing in property with SMSF loans is a great way to build wealth over the long term while preparing for your future.
There are many rules and regulations that govern SMSF lending and determine which costs you can and cannot claim for your property.
If you’re thinkingof investing in property with an SMSF loan, here are three mistakes you should avoid.
Living in your SMSF funded property
The Australian Taxation Office (ATO) has identified that borrowers are not allowed to purchase properties for their own residential use. In fact, the property must not be acquired from a related party of a fund member.
Furthermore, the property isn’t allowed to be occupied by or rented to a SMSF fund member or related parties.
Paying for improvements
Another common mistake often seen in SMSF property investment surrounds renovations.
The ATO has defined repairs as work that restores the function of an asset but doesn’t change its character. On the other hand, improvements can significantly alter the function or state of an asset for the better.
As an SMSF borrower, you’re not allowed to use SMSF finance to pay for improvements to your home.
An example of an improvement could be the extension of the kitchen in your property by adding more bench and cupboard space.
Buying in a bad location
One of the major draws for SMSF property investment is generating wealth over a long period of time. Therefore, it makes sense to secure a property in a good location with positive capital growth.
Find a home in an area with a low vacancy rate, good amenities and in great condition to ensure positive returns over the long term.