Have you ever wondered about self managed super fund (SMSF) diversification and its potential? A SMSF is a type of fund you or your family have established that you are responsible for. Members of the fund are trustees or directors and will directly benefit from their self managed super fund.
Some key benefits that an SMSF offers are flexibility to adjust the self managed superannuation rules for their needs and circumstances and a wider net of options for investment, unlike standard superannuation funds.
In this blog we will help you explore alternative investment options beyond traditional stocks and bonds for your self managed super fund.
If you are considering a self-managed super alternative investment then you should keep reading.
Building Your Future with Tangible SMSF Assets
For Self Managed Super Fund trustees seeking robust, long-term growth without the volatility often associated with complex alternative investments, the landscape can seem daunting. While options like renewable energy, private debt, venture capital and hedge funds exist, they often come with intricate valuation processes, limited liquidity, and a higher degree of inherent risk. Navigating these markets effectively typically requires significant expertise and ongoing professional advice.
Within this spectrum of alternative investments, one asset class stands out for its potential to deliver both consistent income and long-term capital appreciation within an Self Managed Super Fund: strategically selected residential real estate.
Beyond the Complexity: The Solid Foundation of Positively Geared Property
Unlike some alternatives that hinge on unpredictable market shifts or intricate financial instruments, well-chosen positively geared investment properties offer a tangible asset with a clear pathway to returns. Advantages include:
- Steady Rental Income: Positively geared properties, our specialty at Positive Income Properties, are specifically chosen to generate consistent rental income after covering all property-related expenses, including mortgage repayments. This provides a reliable cash flow stream directly into your SMSF, contributing to its growth and your future retirement.
- Long-Term Capital Growth Potential: Historically, residential property has demonstrated strong long-term capital appreciation. This growth, coupled with consistent rental income, can significantly enhance your SMSF’s overall value over time.
- Tangible and Understandable Asset: Unlike some alternative investments, property is a tangible asset. You can see it, understand its value drivers and directly influence its performance through property management.
- Potential Tax Benefits: While SMSF properties cannot be leased to trustees or related parties, the fund can still benefit from potential tax advantages such as depreciation on the property and its fixtures.
A Note on Other Alternatives:
While options like water rights, private equity and infrastructure exist, they often present unique challenges for SMSF trustees:
Water Rights: Heavily reliant on environmental factors and agricultural demand, making returns unpredictable.
- Private Equity: Characterised by illiquidity and potential for significant price fluctuations.
- Infrastructure: While offering potentially steady cash flows, can involve high leverage and substantial interest payments.
Navigating Self Managed Super Fund Property Investment Responsibly
It’s crucial for SMSF trustees considering property investment to conduct thorough due diligence and ensure compliance with superannuation laws, including the “sole purpose test” (investing solely for retirement benefits).
While Positive Income Properties focuses on identifying low-risk, high-return opportunities, trustees must still formulate an investment strategy that aligns with their fund’s objectives and risk tolerance. Seeking advice from licensed financial professionals, particularly those with expertise in SMSF property investment, is highly recommended.
Partner With Positive Income Properties: Building Your SMSF Future with Confidence
For SMSF trustees seeking a less volatile, more tangible alternative investment with the potential for both consistent income and long-term growth, positively geared investment property presents a compelling option. At Positive Income Properties, we specialise in sourcing these opportunities across Australia, helping you build a secure and prosperous retirement.
Investing in an SMSF in Australia requires the help of an Australian Financial Services-licensed financial adviser and due diligence like compliance with the Australian Taxation Office (ATO) so that you can diversify your portfolio and reap the great growth potential of SMSF alternative investments. Diversification is especially important for SMSFs as it can mitigate risks from market volatility but needs thorough research as well as professional advice.
Interested in exploring different kinds of investments and want personalised advice? Contact us today.
Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
