SMSF Investment in Residential Property — Is It a Wise Move?

The value of residential property held by self-managed super funds is growing by around $1 billion a year, rising from nearly $11 billion in 2008 to almost $15 billion last March. But is it a prudent property investment? AFA President Brad Fox isn’t so sure. He says the limited recourse mortgages that SMSFs use to purchase residential property have their downsides. There are more costs involved due to higher interest rates and establishment costs. There are also restrictions surrounding improvements that can be made. This has led SMSFs to turn towards the off-the-plan market, and Fox expresses reservations regarding the uncertainty of buying a property that hasn’t yet been built. Compliance breaches can also be horrendously expensive to correct. Despite these drawbacks, Fox believes SMSFs could eventually account for up to 20 per cent of the residential property market, due to purchasers who are already investors choosing to take the SMSF route.

Source: http://www.wealthprofessional.com.au/article/smsf-investors-cant-get-enough-of-residential-property-142960.aspx