Property like cash, fixed income and shares can be included into a soundly constructed diversified investment portfolio.
Traditional super funds offer limited flexibility in how you gain exposure to property.
Typically when you have chosen an investment strategy within an industry super account, you will have little idea about the underlying assets the investment manager is exposing your super to.
The first place to start is understanding what options are available?
Listed below are a number of ways to achieve exposure to property:
- Purchase real estate using cash
- Purchase real estate using a mix of cash and borrowings
- Shares in listed property trusts (LPT)
- Managed Funds
- Private property development syndications
- Private property investment syndications
Below are some questions which are designed to act a guide to help you to decide upon which investments may be suited to you and your SMSF.
What are the investment characteristics?
- Does the investment provide income or capital growth or a combination of both?
- How reliable is the income stream, is it volatile or stable?
- Does the income carry any tax benefits?
- How volatile is the capital value?
- Does this suit my needs?
How much capital is required?
- How much capital or cash do I need to make an investment?
- Does the amount suit the size of my total super asset?
- Will I be diversified enough?
- Am I prepared to risk this amount into one investment?
How much of an active interest do you want to have?
- How much involvement do I need with this investment?
- Do I have the knowledge, skills or time to undertake these requirements?
- Can they be outsourced and how much will it cost?
Who is managing or controlling the investment?
- Does the manager have a good track record in this type of investment?
- What are the manager costs? Are they fair? Are their interests in line with yours?
Is borrowing an option?
- If so, does my trust deed allow for borrowing?
- Does my SMSF investment strategy allow for borrowing?
- Is borrowing a suitable strategy for the members of the SMSF?
- Do I understand the additional risk when borrowing?
Does the liquidity of the investment meet the needs of its members?
- Does the investment allow for quick release of capital?
- Can part of the investment be liquidated?
- Does the liquidity of the investment meet the current needs of members?
- Does the liquidity of the investment meet the future needs of the members?
- Do you own your own home?
- Do you have investment property outside of super?
- How much should you have within super?
What returns do I need to achieve within my superfund?
- To achieve your goals what amount of super do you need to accumulate?
- What targeted returns net of fees and inflation is required?
- To achieve this target what level of risk is required?
- Are you prepared to take this level of risk?
- Is property required in the portfolio to achieve this risk?
If you need help, we recommend that you speak with a qualified financial adviser to help you decide what investments are right for you. Supervision SMSF can help you to find a suitable financial adviser if you need one.