Self-Managed Super (SMSF) is providing some powerful opportunities for investing in property, multiplying your wealth building abilities and decreasing your tax bill. Sick of the lack of transparency offered from traditional super funds many Australians are turning to property investment in SMSFs to fund their retirements.

And the ability to invest in property through a SMSF means that their superannuation is exposed to an asset class that they understand.

Compared to shares, which can seem quite volatile…people feel comfortable that if they buy a property in the right area, it’s a reasonably safe thing to expect a pretty solid rental return or a pretty consistent rental income.

However, even with all the benefits, using a Self Managed Super Fund to invest in property still remains a somewhat confusing subject.

So, I got on the phone with Sam Wetzler from Sequoia Asset Management to have him answer some of the biggest questions from our readers… and share some ideas about what is possible when it comes to investing in property through your Superannuation.

Over the coming 3 articles, you’ll discover:

• How to unlock the equity in your super to invest in property
• How to pay zero capital gains tax
• How to create a tax free income stream
• How to invest in a 15% tax environment vs a 45% tax environment
• How to pay down a loan much quicker
• Common limitations when it comes to investing in property with your SMSF
• A trick to buying multiple properties in a SMSF

How to invest in the property market without any out of pocket expenses.

Peter: How do you pay for a property bought in a SMSF? Do people have to contribute their own money?

Sam: The great thing is, you don’t have to use your own money, just the balance in your superannuation This is one of the key advantages of buying property using super.

There’s a lot of people out there, who have, say, $200,000 in their super fund and are dreaming they had that sort of money in cash in their personal name to invest. With the standard LVR available to SMSF investors sitting at between 80%-70% investors could potentially buy a $1million property using their super.

So, it’s a great way to get exposure to the property market without actually having to pay anything out of your back pocket. What do I mean by this?

• The cost of setting up the super fund, is paid for by the super fund.

• The cost of administering the super fund is paid for by the super fund.

• All the expenses of the property are paid for by the super fund.

• I should also note that all of the benefits of the property i.e. the rental income or capital gains are also retained by the super fund. Until you retire of course.

One of the big benefits of investing in super is that generally most of the money going into the fund (think employer contributions) are going in pre-tax. So you are paying these expenses with your pre-tax super contributions.

Employer contributions and any salary sacrifice goes into the super fund before tax and and is then only taxed at 15% in the super fund. Whys is this such an advantage? Well let’s say you are on the highest marginal tax rate of 24%. For every $1 you earn you give away 45 cents to the tax man. That leaves you with 55 cents to pay your expenses and pay down the mortgage (ignoring any offsets you might get). In super, the tax man only takes 15 cents to every dollar you earn, so you’re getting much more bang for your buck so to speak.

…So essentially you could expect to pay down the loan a lot quicker, because you’re paying a lot less tax with every dollar you earn in super.

Another huge advantage is that once you retire, there’s no capital gains tax.

That means you pay zero tax, on capital gains, if you choose to sell the property.

Or you might decide to keep the property, in which case the rent becomes a fantastic tax-free income stream.