How Much Money Do You Need To Invest In Property Through Your Super? (Ep214)

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This question is the first of three that comes from Tracy (I’ll answer the other two separately) and it says, “How much money do we need to have combined for utilizing a superannuation fund money on an investment property?” (I’m assuming that combined means she’s talking about herself and her spouse.) Disclaimer: I can’t advise what to do with the self-managed super fund because it is a financial product. None of this can be considered financial advice and I’m just going to tell you what I know about the subject.  

You don’t need a minimum amount of money to start.

Firstly from my knowledge when it comes to a self-managed super fund there isn’t a limit set to where you have to have a certain amount of money to invest or start the super fund. It’s up to you when you want to create your self-managed super fund and what you want to do. At one point I had considered combining my super money with my wife’s but I was advised against it. Some people said you should have at least $50,000 and some said you should have at least $100,000 but there really isn’t a set amount that you should have. It depends on what returns you would get. If the returns are going to offset your increasing fees and it would be better than what you expect to get in super then maybe it’s something you could consider. However like I mentioned I can’t give you advice.  

There are fees.

You do need to take into consideration the increased costs that come with running your own self-managed super fund. So I went to the ASIC website where it has information about the different costs. There are upfront fees for setting it up, legal fees, advice fees, bank fees and on-going management fees. Running a self-managed super fund isn’t just putting your money in a super account and there are a lot of fees that are associated with it.  

You can get loans through your super fund.

When it comes to how much you need to buy a property you can get loans through your self-managed super funds. They are not necessarily harder to get but sometimes have higher costs associated with them and potentially higher interest rates as well. It can be harder to cancel and to get out of it you would need to sell your self-managed super fund property. There are also limitations on what you can buy.  

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    Basically look at what you would need for a deposit for your property and then look at whether or not the property is going to generate returns high enough that you think are worth the extra costs you’d have to pay. You should also consider that with a self-managed super fund a lot of the tax benefits associated with negatively geared properties probably aren’t going to apply. I can’t say for certain but from my knowledge with negative gearing you offset it against your employment income and I don’t think you can do that with the self-managed super fund. So how much money do you need? You need at least enough money so that your returns are going to be good enough that the fees become menial but then you also need enough money to form a deposit on the property you’re going to buy. I would assume that you’d need at least a 20% deposit plus stamp duty and other costs. You’ll also need enough money to handle a property that is negatively geared. Every situation is different but I hope this has helped you. If you have any questions that you want answered then email me at [email protected] or go to onproperty.com.au/contact. Until tomorrow remember that your long term success is only achieved one day at a time.