For those managing their own retirement income with a self-managed super-fund (SMSF), finding the right investment strategy can be a tricky path to navigate. While a diverse portfolio is always recommended (shares, property, and cash being the cornerstones) finding the right balance to adequately meet your needs requires patient research. And remembering that not all those with SMSFs are out of the workforce (though many are), finding the time for this due diligence can make the process stressful.
There’s no doubt that property has an integral role in a diversified SMSF portfolio, but property investment does not start and end with residential real estate. Other kinds of property investment can offer SMSF members a range of benefits that avoid some of the hassles of the traditional real estate investment model.
Serviced apartments, for example, are becoming an increasingly popular choice with SMSFs, as the model allows the fund to earn a good return with minimal involvement.
This is achieved through a simple yet effective model of long-term leasing. The SMSF purchases the apartment, which has a long-term lease to a Quest Franchisee who then lets the apartment for short-term stays, like a hotel. Because the Quest Franchisee is the tenant (not whomever is occupying the room) the SMSF is assured a reliable income for the duration of the lease, regardless of whether someone is staying in the apartment.
Additionally, the lease comes with built-in rental increases occurring annually in each 5 year term of the lease. This has a huge impact on forecasting and budgeting for each term, allowing the members to ensure the SMSF can adequately allocate funds to cover costs, with no sudden surprises, plus enjoy a little bit extra coming in as time goes on.
Purchasing property through a SMSF comes with a different set of rules to buying property as an individual or couple. First and foremost, the property can only provide benefits to the fund members. You can’t live in it yourself, and neither can anyone you (or any other members of the fund) know or has ties to. You also can’t buy it from someone you know. These may not be insurmountable problems, especially if you’re not buying locally, but something that SMSF investors (particularly those in larger funds) need to be aware of. Purchasing a serviced apartment avoids these issues altogether, making the due diligence and selection process far simpler.
Finally, in terms of due diligence, selecting a serviced apartment to buy is a much simpler prospect than trying to select a property from the millions of residential properties for sale at any one time. Serviced apartment operators, such as Quest Apartment Hotels, have teams of researchers working closely within established networks to ensure the locations selected will support the business model.
Investors looking to purchase a property therefore have an instant shortlist of properties that already meet their criteria, without compromising on the factors that make serviced apartments appealing: reliable income, increased cashflow and minimal hands on involvement.
Quest Properties specialize in the sale of serviced apartments for Quest Apartment Hotels, Australia’s largest serviced apartment operator. SMSF investors interested in serviced apartments as an investment strategy are sure to find an apartment that suits their fund among the more than 150 Quest Apartments across Australia and New Zealand.