SMSFs & Off The Plan Apartments

Buying a Property and establishing a Self Managed Superannuation Fund requires a clear strategy to determine if a SMSF and property is right for you.

Off the plan apartments can be attractive to many investors, however there is more to consider than the glossy brochure.

Deciding on the right criteria for an SMSF investment property will help to determine its success.

To grow your wealth through investment apartments you need to look at a number of factors and then ensure you keep these in mind when deciding on your property purchases.

Why are apartments so popular for SMSF?

There is no shortage of advertising for the apartments for sale. Developers spend significant dollars on marketing including flyers in your letterbox and marketing agents contacting you endlessly to sell the benefits of off the plan apartments - many use the words “perfect for SMSF”.

Many Australians have been priced out of the property market, with a booming property market in most capital cities.

Therefore, with the declining share market and the hype around borrowing within an SMSF, many Trustees have turned to investing in property with their super.

In fact, according to the ATO, SMSF borrowings have now reached $18 billion – over 3% of the $576 billion of total SMSF assets. This has grown $1.4 billion in June 2011.

With foreign investors, SMSFs are a huge target market for developers and marketing agents alike.

Many consider the benefits of an apartment v a town house. Here, we focus on off the plan apartments.

It is important to have a documented investment strategy when you purchase an apartment that includes a how your apartment fits into your overall investment portfolio, which will be diversified, with a cash buffer for a rainy day.

After all, SMSFs are supposed to be fun, and making a poor investment decision can be quite stressful to say the least.

Careful planning can help make investing in SMSF property a success.

Advantage of off the plan apartments

• Developers sell at a discount to obtain their own construction loan approval
   
• Low stamp duty

• Settlement of 12-18 months helps to plan your cash flow and obtain capital gain in a rising property market

Disadvantages of off the plan apartments

• Risk of a sunset clause
   
• Delays in completion
   
• Construction quality may not be up to your standard
   
• Interest rates increase before you settle