We have helped obtain a lot of investment loans for small Perth property investors over the years. With the newer trend of using one’s Self Managed Super Fund (SMSF) for investment properties, the simple investment loan has been forgotten by many. However, there are certain risks and pitfalls when using your SMSF. It is good to know these risks so that you know when it’s good to use your SMSF and when it might be better to use an investment loan.
The SMSF Trend
In 2007, the ATO decided to allow SMSF’s to be used for property investing. There are now more than 517,000 SMSF’s and over a million people are trustees. Those SMSF’s hold nearly a third of Australia’s superannuation funds: $520.5 billion out of $1.7 trillion. Unfortunately, that has made SMSF’s the target of many scams, including numerous real estate scams.
Many of the scammers have websites set up that make them look legitimate to most people. They send slickly-produced information packs in hopes of finding new victims. According to David Lacey, Executive Director of the Australian Crime Commission, up to ten victims per week fall prey to SMSF scams, losing anywhere between $35,000 and $4 million apiece.
The Risks
Borrowing through an SMSF is regulated more strictly than standard loans are. Unfortunately for consumers, the regulations protect the lenders a lot more than they protect consumers. Victims who are scammed through their SMSF’s are usually responsible for all of the money lost. In addition, an SMSF cannot be used to purchase a property in which any trustee lives and it can’t be used to improve or renovate a property.
Call Purely Finance
A lot of people become very successful using their SMSF’s for investment properties. Many investors choose to use investment loans. Either way, you can count on the mortgage brokers and financial planners at Purely Finance to help you choose the best course of action for your future. Call 1300 745 778.