Purchasing a property is a dream for many which they hold very close to their hearts. It is not only the commencement of a new life under a new roof but it is also symbolic to new beginnings. A new beginning should be initiated with a stress-free and positive mind. Along with an optimistic and positive mindset, the most important thing which you need to purchase a property is proper strategy and plan which will make sure that you avoid making mistakes.
If you are planning on purchasing a property through your Self Managed Super Funds, read on to get the answers you are looking for, or things you should and shouldn’t do!
- Watch Out For Risks –
Purchasing a property, while beneficial in the long run does come with certain risks. When buying a property using an SMSF to buy property, the property should be held outside of the SMSF in a Holding Trust when you try to purchase it with debt. Why so? Because, when you try to transfer the property to the SMSF once the debt is paid off, the transfer can engender risk in the SMSF, ultimately increasing the chances of exposing all of your SMSF assets.
- Fines On Incompatibility With Law –
Your SMSF must comply with the super law or you may have to face heavy fines if the ATO finds your SMSF breaking a law. Non compliance and incompatibility with all laws, state and national is a mistake that should be avoided at all costs.
- Wrong name –
Excited to sign the dotted line on the sale contract to begin a new life in your new home? Make sure the name which appears on the contract is the one you use while setting up the holding trust with a corporate trustee. Believe it or not, but you’d be surprised to know that this is a mistake that is often made while purchasing a property in SMSF with debt.
- Life insurance –
SMSFs have a lot of family members who associate with each other to pool funds. This leads to a very common albeit inconvenient issue, which is, if a family member dies the balance has to be paid out. People believe that that balance can somehow be paid off through insurance money, which is absolutely not true. Therefore, sometimes, less is more!
- Renovation Funds
Before going all passionate to renovate your home you should also pay heed to the rules and norms of the government regarding renovation & the source of the fund used to carry it out.
The legislation allows the homeowner to carry out cosmetic renovations on the property as they are classified as “Repairs”. But the common mistake some people make is that they go over the board and do renovations to their property without knowing that they may not fall under what the legislation deems to be “Repairs”. For instance, knocking down a wall and extending the kitchen area may seem like a small change to some, but according to the norms, it is termed as “Improvement” and not “Repair” and should use internal SMSF cash.
Listed above were the top 5 mistakes which you should, at all costs, avoid while purchasing a house in super. Purchasing a home gives you and your family a new start with infinite new objectives. Make sure you capitalise on the opportunity to the fullest, while being careful and choose to buy a house which speaks to you!
Thanks for reading through our blog! Connect with our property consultants and get all the help you need while investing in a house with your Super! Get with us at at 02-81230180 or dropping us an email at firstname.lastname@example.org
It is advisable to get in touch with your financial planner, mortgage broker and accountant before investing, for better clarification!
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