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Differences between buying an SMSF investment property vs. in your own name

Updated: Aug 18, 2022

Understand the major differences involved when buying an investment property in your own name versus buying an SMSF investment property


There’s no doubt that real estate investments are one of the securest forms of investment. There are numerous ways to invest in real estate. In this article we’ll primarily be discussing residential properties. Additionally, the major differences between buying an SMSF investment property versus one in your own name.


SMSF stands for Self-Managed Super Fund. It’s a privately managed fund that the trustee operates for their own benefit. They must still comply with laws and regulations. Trustees of an SMSF are allowed to access loans within their super to purchase an SMSF investment property.


In an article we wrote earlier this year we explained how you can purchase an investment property in your superannuation. We also shared some of the greatest benefits of it. Those benefits include:

You can access our earlier article here to learn more about the benefits of buying an investment property through your SMSF.

Benefits of buying an investment property with SMSF
Benefits of buying an investment property with SMSF

What SMSF investment properties can you buy?


When buying an SMSF investment property, you can purchase residential, commercial, and industrial properties. They include established, new, and off-the-plan properties. For advice on what type of SMSF property you should purchase, we suggest you consult a financial advisor. It’s a situational topic that depends on individual circumstances and long-term goals.


What are the differences between buying an investment property in an SMSF versus your own name?


Property investment tax deductions

Property investment tax deductions in your own name

When you own an investment property in your own name, there are a few advantages and disadvantages. They are:

Tax advantages of owning an investment property in your own name
Information comes from: https://www.quinns.com.au/blog/should-you-buy-your-investment-property-in-your-own-name-or-your-smsf/#:~:text=Arguably%20you%20could%20buy%20a,to%20diversify%20your%20retirement%20assets.

Property investment tax deductions in your superannuation set up

When you own an investment property in your superannuation, the major advantages and disadvantages are:

Tax advantages of owning your investment property in your SMSF
Information comes from: https://www.quinns.com.au/blog/should-you-buy-your-investment-property-in-your-own-name-or-your-smsf/#:~:text=Arguably%20you%20could%20buy%20a,to%20diversify%20your%20retirement%20assets.

Borrowing against equity growth for another investment property loan


One of the greatest disadvantages of buying an investment property within your SMSF is that you cannot access another investment property loan from the equity growth in an existing property. There are laws that prevent trustees from using capital growth to borrow against.


When buying an investment property in your own name, it’s easier to utilise equity from capital growth within an existing property to borrow against, in order to fund another purchase.


Investment property loan and deposit


When buying an investment property in your SMSF for residential purposes you generally need to pay a minimum deposit of 20%. You should also have an extra 5% to cover any additional costs involved in completing the purchase. For commercial investment properties purchased within an SMSF it’s 35%.


The deposit needed to purchase an investment property when you’re purchasing in your own name is generally lower. Typically, most banks accept a 20% deposit. Though, some lenders accept a lower deposit so long as you can pay Lenders Mortgage Insurance (LMI). The deposit can be made up with savings or equity from an existing home (which you cannot do with an SMSF).


To find out more about your property investment options…


When determining if you should buy an investment property in your own name or SMSF, we recommend consulting a team of professionals (like us) to holistically assess your situation. They’ll help you to understand your options, entitlements, and how it’ll work for your long-term wealth creation and retirement plans.


Here at REIF we work with a range of professionals across the financial planning, accounting, lending, and property space. To learn more, call us on 1300 130 932 or click the button below to book your free Investment Strategy Consultation.


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