In the short term, it may make sense to invest in real estate through your self-managed superannuation fund (SMSF). However, in today’s market, is this still a sensible choice? Investigate the benefits as well as the drawbacks of utilizing your retirement savings to Buying property with superannuation.
Your financial advisor is always the best source of advice when it comes to your retirement funds. Despite the title, this piece does not provide financial advice. Here are some things to think about when determining whether or not to use your retirement funds to purchase real estate.
The pros of using your super for a property purchase:
You can use your super to purchase any type of real estate, residential or commercial. If you buy a residential property after the retirement age of 65 and are not working at all it means you won’t have to worry about saving up a deposit yourself, or borrowing from a bank – instead, your superannuation fund will be used to pay for the property.
The purchase of property with your SMSF really depends on individual circumstances. If you can afford to make regular contributions into your super fund. there may be no reason why you couldn’t save up enough money for a deposit yourself without your super fund.
It may be tempting to utilise your retirement savings to buy a home, you should think about whether you have any other savings that you may use instead. An investment property’s dividend payment will almost probably be higher than the interest rate on your mortgage. Your monthly payments will be lower, and you won’t have to pay as much in interest.
The cons of using your super for a property purchase:
One of the biggest problems with using your superannuation contribution limit as a deposit is that you typically won’t be able to access the money until you retire. This means that you will still have to save up enough money for a deposit, and then use that as the payment on your property.
Because of this, some retirees choose to use their superannuation increase for an investment property instead. When purchasing an investment property with your rate of superannuation, you won’t have to worry about saving for a deposit. Instead, you can use your super to pay for the entire property – including stamp duty and other fees.
Investing in real estate has its drawbacks, such as the high cost of a deposit and the long-term repayment of a mortgage. When all of your investing eggs are placed in one basket, it isn’t usually the smartest investment strategy to do. You will be dependent on the performance of the local real estate market if you own a property there.
A balanced portfolio with many different investment streams can often make for a safer investment strategy. Diversifying the fund to include areas such as shares, crypto, bitcoin, cash and other asset classes will balance out the super fund.
Ultimately, you’ll need to consult with a financial professional because every situation is unique.