A self-managed super fund is your money. It is the money you have saved up in your retirement plan. It is your hard-earned savings from the blood, sweat and tears you have put into your career. It is essential and should be used to its utmost. Rather than having all that money sat there not doing anything, why not use it to invest?
This is the premise of SMSF loans. You use the money you have saved up in your retirement fund as collateral to fund a purchase on an investment property. This could be a business or a buy-to-rent residential property. Since the introduction of self-managed super funds, people have been given access to funds that would otherwise be beyond them. It allows people the option to follow their dreams, by investing in a business close to their hearts and watch it grow over time.
There are some crucial factors to consider when thinking about applying for an SMSF loan. Firstly, the deposit for the loan must be taken directly from the money in the fund. You cannot use other funds for the deposit. Secondly, all the repayments that you make on the loan must come from the super fund itself. Any profit from the investment business property must be paid back into the super fund.
Buying an Investment Property with SMSF Loans
Some larger companies are now offering SMSF loans to help get you up and running with an investment purchase.
This type of loan can help you purchase a property such as a:
- Retail property – open a shop, a restaurant or a different kind of retail outlet to act as an investment property.
- Residential property – Buy a property with an SMSF loan and rent it out. There are often strict rules governing residential property SMSF purchases. Usually, you are not allowed to sleep in the property at all. Also, all the money from the rent must be paid into the super fund.
Other Ways to Secure Capital
Always keep your options open by researching a variety of ways to fund your business. Examples of other avenues one can explore to secure funding include:
- Bank loan – Short- or long-term bank loans are a widespread way to secure funding for a new business
- Credit card – often more expensive but reliable way to get funding.
- Grant – applying for government funding to get funds to start your business is always worth looking in to.
Even though there are some restrictions to self-managed super funds, they are a way to achieving your goal of securing an investment property.