Although managing your own super isn’t nearly as simple as signing up to a managed fund, many Australians are relishing the opportunity to take control over their own future finances. Increasing numbers of Australians are choosing to manage their own super. In fact, SMSFs make up around 30% of the superannuation industry, a figure which is expected to grow over the next 15 years[i].
Property is an important part of any SMSF investment strategy, however purchasing property through your SMSF comes with a few different conditions. The Australian Tax Office requires that the property provides solely retirement benefits to its members; that it may not be acquired from a related party of a member; and it must not be lived in or rented by a fund member or any fund members’ related parties. The property must also meet the fund’s investment strategy and trust deed, and take into account the personal circumstances, ages and risk tolerance of all fund members. This means you can’t purchase your family home, or even the home of anyone you know, through your SMSF.
While it is possible to invest in real estate the traditional way (through an agent and then renting it to a member of the public) Quest Properties offer SMSFs an alternative solution through its serviced apartment portfolio.
Serviced apartments are an interesting prospect for SMSF investors, due to the commercial nature of the transaction, the long-term leases, and cashflow benefits.
When you purchase a property through Quest, you are the owner of the apartment with a long term lease back to the Quest franchisee. This arrangement fulfils the ATO requirement of keeping the purchase at arms’-length from any members or parties known to the members.
Another benefit of this arrangement is that owners are paid their rent, regardless of whether the property is occupied or not. The tenant is Quest, who then let the property for short-term stays (like a hotel) to members of the public, usually corporate travellers.
Not only is this rental income secured by a fixed rental lease, it comes with built-in rental increases (usually around 4%), making it possible for investors to forecast and budget with that income. Additionally, there are significant tax benefits to purchasing property through SMSF, particularly if purchased before retirement, including a lower tax rate (15%) on income earned through the property.
Quest undertakes rigorous research to identify locations in demand to business travellers, and purchases or develops properties in these areas in order to maximise opportunities. For this reason, what is for sale in the serviced apartment market can seem quite different to what is hot in the residential market. The serviced apartment market is also not as susceptible to the fluctuations of the residential real estate market. Many argue this is a safer bet for long-term SMSF investors.
Aligning with corporate business growth is a proven strategy for Quest, which now has a network of over 150 properties across Australasia and a 25% market share in accommodation, making it well-established in the serviced apartment industry.
For SMSF investors looking for a secure, hassle-free, long-term investment option, Quest serviced apartments offer a one-stop-shop that is definitely worth investigating.