Property potential untapped by many SMSFs
Everyone knows the stereotype of the ‘mum and dad’ investors who have set up their own DIY super funds and have managed to put one or two residential properties within it. But how much further does property investment within SMSFs go?
Quantum Financial Advisors director Tim Mackay said that while the stereotype held true, it was by no means the limit of property investment within self-managed super funds (SMSFs).
“We’re not just talking about mums and dads here,” he said. “I’d argue that SMSF trustees and members who are also business owners are likely to have a particular interest here as well.
“So, in particular, the ability to get their own business premises into their SMSF can be an attraction for many of our small to medium-sized business owners,” Mackay continued. “It gives them help in their business, but it also gives them the income that it throws up in retirement, depending on what sort of commercial property it is.”
Similarly, Matrix Financial Planning managing director Rick Di Cristoforo said that under certain conditions, SMSF trustees with a decent amount of money were opening their eyes a little to the commercial side of property.
“So while there may be lower growth, it satisfies an income requirement that perhaps other sectors don’t cover,” he said. “Most people talk about business real property and looking at residential, and that’s pretty much it – but within business real property, you generally see people putting their own business real property into it,” Di Cristoforo continued. “But there’s also this whole idea that I might not actually be operating in that business unit that I own down the back of Baulkam Hills.
“I can, however, still invest in it via my SMSF because I’ve got enough cash to do so.”
Asked whether SMSF property investment extended to instruments like listed property trusts or real estate investment trusts, Mackay said that those wishing to maintain a diversified portfolio definitely had them in the mix.
“Our preference is actually via the ETFs [exchange traded funds] which invest in REITs,” he said. “And if they’re trying to get a diversified portfolio, they should definitely have some commercial property exposure in there.
“For us, having a low-cost ETF is probably one of the best ways of doing that.”
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