Ask An Adviser - Should I Switch To A Self-Managed Super Fund To Invest In Property?

Top answer provided by:

Jordan Vaka

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Thanks for your question, Brent, and great work examining your superannuation options early on in the journey.

Before I start, I have to mention that I’m writing this as somebody who has seen a lot of people go down the path you’re considering - and seen it go wrong way too often.

I’ve seen people who used their super to buy an off-the-plan property. And ten years, they’re now stuck with an asset that’s worth less than the artificially inflated price they paid for it.

When they factor in all of indirect costs involved, well, it’s not a pretty picture.

So I am, I should be clear, an SMSF sceptic.

Now I have my bias out in the open, I’ll try and answer your question!

There’s one big question that underpins any significant financial decision – how will this help you achieve your financial goals?

Which requires you to define your goals, of course.

And once you’ve done that, you’ll be able to view this option dispassionately and ask – does this get me closer to those goals or not?

Because it’s easy to fall in love with the exciting aspects of any financial proposal.

But anchoring your choices in your personal financial goals should expose them for what they are: just another option, with its own pros and cons.

And in my experience, the cold arithmetic of buying property within an SMSF doesn’t always stack up.

First, there are the significant costs involved:

-The cost of setting up the fund – plus any advice you need along the way.
-The ongoing costs of running the fund.
-The cost of acquiring the property.
-The fees and commissions you’ll pay along the way.

Then there’s the time and risks involved in running the fund.

Some people will tell you it’s a doddle to run the fund; it’s not.

In fact, it comes with some serious obligations and consequences if you get it wrong. You can outsource most of that work, but the burden of responsibility sits on your shoulders.

These costs alone make me doubt whether the path you’re considering is a good one for you.

To be blunt – the costs, obligations and risks in running an SMSF are so serious that for them to be outweighed by the benefits, those benefits need to be massive.

And look, in some cases, they can be. But certainly not in every case.

So in your situation, I’d carefully consider how this complex, expensive and intensive option answers the one, big question – how will it help you achieve your financial goals?

Best of luck!

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Article by:

Jordan Vaka

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