Your retirement is something that you have to spend many years planning for. If you have not yet put any money in your retirement account, you should start as soon as possible. One way to start preparing for retirement is to buy real estate. Using your retirement account, you can start investing in properties that will yield a steady income now and in the future.
A superannuation property is a property purchased using your retirement funds. The good news is that up to four people can contribute funds from their account to make a single purchase. This can help you come up with the 20 percent down that you will need as well as other cash reserves that you have to have to qualify to make the purchase. The good news is that you can borrow the rest of the money from a bank. In the United States, you have to pay the entire purchase price if you buy using a retirement account.
What Are The Tax Benefits?
The tax benefits of a SMSF property can help you save a lot of money while you own the property. Your rental income is only taxed 15 percent while capital gains taxes drop to 10 percent after the first year of ownership. No capital gains taxes are required when you eventually sell the home.
What Happens If I Run Into Financial Problems?
The good news is that your entire retirement account is not at risk if your property is foreclosed on. However, you always have the option of selling the house or increasing the rent if you need more cash to cover the expenses related to the house. Another issue that you may want to consider is having to put more money into your fund. If you buy a SMSF property, that money comes out of your account. At some point, you have to replenish that fund through rental or sales revenue or personal contributions.
Keep Track Of Unqualified Parties
The only downside to buying a property with retirement funds is that you cannot rent properties to family members or friends. Any properties rented to friends or family could be considered personal property and lose the protections granted by keeping the property in your retirement account. Fees and penalties may also be levied against you due to your illegal actions.
An Account Only Takes 24 Hours To Create
Unfortunately, you cannot buy a property, set up a SMSF account and the transfer the property afterward. The good news is that you can set up an account in as little as 24 hours. This means that you won’t have to wait too long if you have a property that you want to use retirement funds to purchase.
Your retirement savings offer you a great tool for investing in real estate. You can make money now through your rental properties while also making sure that your money can grow and accrue interest while being taxed at a lower rate. That is a winning proposition for anyone who wants to save for their retirement in an effective manner.