Common SMSF Property Mistakes That Investors Make

It is not wrong to say that as soon as the SMSF (Self-Managed Superannuation Fund) was introduced to the Australian population, it has evoked a massive interest among employed Australians who are slowly approaching their retirement and want to ensure themselves fruitful and comfortable retirement days.

To better explain the real meaning and significance of SMSF, let's imagine the total Australian superannuation as a huge pie, where the self-managed superannuation fund takes the greatest slice of it. Hence, no need to mention that today, SMSF is the fastest growing sector of the entire Australian economy, which is also supported by the reports coming from SMSF statistics.

One of the most valuable assets held in self-managed superannuation funds is real estate, undoubtedly. Therefore, investing the retirement savings (cash, shares and fixed interest) into real property is today's biggest trend among SMSF trustees.

Apart from all the benefits, SMSF statistics also report the most common SMSF property mistakes made by investors.

Property holding the name of the individual.

In the world of SMSF, this is a big no-no. A purchased property needs to hold the name of the fund and not the name of the individual who bought it, which is one of the frequently made mistakes by SMSF investors. In order to remain compliant and respect the SMSF strict rules and principles, the purchased property should never be held in an individual's name.

Property purchased with multiple titles.

An SMSF buying property contract allows only a “single acquirable asset”. This means that properties that come with more than one title or are already sub-divided, are not allowed to be purchased by the SMSF real-estate investor.

Property purchased before an SMSF trustee and holding trust are established.

Another important SMSF rule is: 'While signing the property-purchase contract, both SMSF trustee and holding trust have to be in existence. This mistake commonly occurs due to bad timing of the actual transaction regarding the real-estate purchase. Thus, before signing a contract for acquiring a property asset, an acquiring entity must exist previously.

Borrowings are not allowed in SMSF.

According to SMSF statistics, this is the  most common mistake made by SMSF trustees by far. The truth is, no trustee is allowed to use borrowings in order to improve the property investments. For example, an SMSF trustee cannot borrow $600, 000, then use $400, 000 on an empty-block purchase and spend the rest $200, 000 of the loan for construction purposes.