Diversifying investment portfolios
A key investment strategy is the diversification of investments across asset classes. Investors looking beyond stocks and bonds to achieve such diversification are wise to focus on assets that they understand.
Some investors may look at what are called ‘alternative investments’ because of a particular passion – perhaps wine, coins, or stamps. But these types of investment are extremely niche, with a small market and volatility of price that can severely harm short term investment valuations.
Achieving greater diversification, while maintaining exposure to a large liquid market, is a major attraction of real estate investment. As an asset class, real estate is also something we all have a feel for.
Benefits of Commercial Property as an SMSF investment
Property held within an SMSF offers an effective investment as part of an overarching SMSF investment strategy. Most trustees, however, concentrate on residential property, and ignore SMSF commercial property investment. Yet there are several benefits of commercial property over residential property.
• Rental income is generally higher
Commercial rents yield in the region of 7% to 9%, as opposed to typical residential yields of 4% to 5%. Of course, this depends on location and type of property (which is why we research), and the higher yield may come at the expense of potential capital growth.
• Longer let times
Commercial properties tend to be let on a longer time frame: sometimes for 5 or 10 years or more. Residential properties have far shorter lease periods with longer vacant periods. Consistency and certainty of rental income are two factors of SMSF commercial property investment.
• Use your business as the tenant
While a trustee may not gain personal advantage from an SMSF residential property investment, perhaps the major benefit of commercial property within an SMSF structure is that your business is allowed to be the tenant of the property.
How to invest in residential property in an SMSF
You may borrow up to as much as 70% of the value of a commercial property when investing through an SMSF, and you could buy and lease back your business property. Of course, the investment must fit in your investment strategy.
Moreover, though a commercial property may benefit from a long lease period, when it falls vacant it could remain so for a long time (especially in difficult economic times). For this reason it’s even more important to seek expert advice when investing in SMSF commercial property: research is the most important factor in achieving investment aims.
SMSF Commercial Property and Super Finance Professional Networks
Business owners can now unlock the potential of their commercial property while improving the performance of their SMSF. Super Finance has a wealth of experience and expertise in the market to help business owners achieve exactly this, as well as enabling non-business owners to realise the benefits of commercial property held within their SMSF.
An initial free consultation with Super Finance will solidify these benefits, with actual results and case studies as real life examples of the potential of commercial property within your SMSF. You’ll find out how much you can invest, the tax savings possible, and how such an investment will enhance your investment strategy.
