What criteria need to be met to purchase property with SMSF loans?

Taking out self managed super fund loans (SMSF) could be a great way to begin saving towards your retirement. One of the most common uses for these funds is property investment. This could be something for you to consider heading into the future,but there are a number of things you need to think about before committing to the idea.

What are the criteria for purchasing SMSF property?

There are a number of conditions that need to be met before you’re able to use your SMSF loans to purchase property. The first is that you must meet the requirements of the sole purpose test. This means the property is maintained for the sole purpose of providing retirement benefits to the fund members.

There are a number of charges involved with this, which is why it could be a good idea to chat with a financial professional before committing to any SMSF investments.

Furthermore, the property cannot be purchased or acquired from a related party to any member of the fund. Therefore, gaining real estate from relatives or any other relations is strictly prohibited. After the acquisition of the property, it cannot be purchased or rented to anyone related to the members of the fund, either.

These restrictions are all in place to help avoid the incidence of fraud and other infringements on the law, keeping everything above the law and legal.

What are the costs involved with purchasing SMSF property?

There are a number of costs involved with purchasing property. When purchased with your SMSF loans, these fees can add up and reduce the overall balance of your super. These costs include things like legal fees, stamp duty costs, advice fees and ongoing property management charges.

It’s important to ensure all involved with these decisions are comfortable with the outgoing costs of the property versus the incoming retirement benefits.