The Process of Buying Property in Super
Buying an investment property in super can be a very attractive and beneficial strategy – If implemented correctly. We have outlined the simple steps you need to follow if you want to purchase a property with your super;
1. Setup a Self Managed Superannuation Fund – This is the only super vehicle you can use to purchase a property.
2. Setup a Bare Trust (sometimes referred to as the Property Trust) – This is the holding entity of the property (not the loan) and must be the name written on the front page of the contract.
3. Setup the Security Trust Document – This is done at the same time as the Bare Trust and it is the document that links the Bare Trust and the Trustee of the Self Managed Superannuation Fund together.
4. Get Loan Approval – Getting a super loan is not like getting a normal loan. There are only certain providers in the market and each have their own specific requirements. If you have equity in your home, you can potentially do a related party loan which will be an easier process and have a lower interest rate than a normal super loan.
5. Setup the right bank accounts – All rental income and property expenses/interest must come from your super bank account.
Without any of the above steps, your fund will essentially be non-compliant which means you run the risk of losing half your your fund in penalties.
To find out the biggest mistakes when buying property, click here to read our blog article.