Become your own Landlord and buy a Commercial Property with Self Managed Super

I read a recent article in the Melbourne Age which highlighted how big a trend property and Self Managed Super really is. Here's a snippet from the article:

SELF-MANAGED super funds are becoming important players in the CBD strata office market.

The trend was shown by a recent sale of a 120-square-metre office floor within 313 Little Collins Street. It sold for $565,000, reflecting a rate of $4700 per square metre.

The vacant, fully self-contained whole third floor was bought by a local owner occupier, who acquired the property through his self-managed super fund. CBRE city sales agents Tom Tuxworth and Ed Wright negotiated the sale on behalf of Fenton Design Group Architects, which had occupied the space since 2006 but recently relocated.

Mr Wright said Melbourne's strata office market continued to mature as both owner-occupiers and investors learnt more of the benefits of buying commercial real estate in their Self Managed Super Funds.

 

Whilst thousands of Australians are discovering some of the secrets that big super funds and financial advisers don't want us to know; that our superannuation can be used as a deposit on an investment property using Self Managed Super, it seems that business owners are also discovering the benefits of SMSF and using their fund to purchase commercial properties from which they can operate their business.

Commercial property is unique, in that your super fund can purchase the property from your land lord, if he's willing to sell, purchase a property in the open market, or from yourself if you already own and occupy your business premises.  As long as the premises is leased from your super fund at commercial rates, your fine.

Whilst this strategy is not new, being able to borrow within your SMSF to complete the purchase has only been around for a few years, opening up significant opportunity to get of the business rental roundabout and into a commercial property that serves their retirement funding needs, and business premises needs at the same time. 

Are you thinking about establishing a SMSF and need some more information or interested in transferring your SMSF to Exelsuper? Please feel free to Contact Us if you have any questions.

The Stolen Superannuation Generation

It's very rare that you'll find me applauding a government (it only encourages them), but I did think that Kevin ‘07's "sorry" gesture to the stolen generation was the right thing.  Sometimes a simple "sorry" can do immense good and in the words of the Indigenous leadership of the time it "enabled the healing to begin".

So how does this relate to superannuation you ask?  Quite simply, I am yet to hear a Retail or Industry Super Fund, their advisers or managers, say "sorry" for the part they have played in trimming our standard of living in retirement during the recent volatility and decline in share markets.  

Don't get me wrong, I know that there is no crystal ball, but just as KRudd's gesture started a healing process, some sort of gesture from the superannuation community might be the catalyst needed to start changing a system that is clearly flawed.  The trouble is does anyone within the superannuation industry really want to foster change? 

To explain this you need to understand that Superannuation is a Trust and Superannuation law states that the Trustees have a duty to represent their members’ interests.  This includes making appropriate independent investment decisions, (including managing risk and insurance) on behalf of members.  In SMSF every member is a trustee, so trustees are pretty keen to make good investment decisions because it's their own retirement on the line.  For most Retail and Industry funds there is usually an independently elected Board of Trustees to make the decisions on behalf of members.

But how impartial are these duly elected Trustees and do they in fact act in our best interests?  Why is it that no one in the superannuation industry or the Regulator queries the Board of Trustees when they invest large portions of members’ money in-house?  Maybe it’s time for us to ask the tough question “whose side are the Trustees of my super really on?”

Here is an example, AMP run a superannuation fund called AMP Superannuation Savings Trust where AMP Superannuation Limited is the Trustee.   On behalf of its’ members, the Trustees research the most appropriate investments to make and can source the investments or insurance from anywhere they choose that will best benefit the member's retirement, death or disability.  AMP Trustees reported in the AMP Superannuation Savings Trust Annual Report that they have chosen to invest a large chunk of the fund's money with AMP Capital Investors and place all the insurance with AMP Life.  So what happened to the impartial research process then?  Is this really the best decision for members?  I bet the AMP shareholders think this is a great decision. 

Why am I singling out AMP?  Well, I'm not.  In fact this is pretty much the standard model used by all fund managers to run Retail Super Funds, hence the reason why I'm suggesting the system needs to change and why so many disgruntled people are turning to Self Managed Super.

900,000 Trustees of Self Managed Super Funds control approximately one third of all superannuation money that was previously invested in Retail and Industry Funds and who are, according to the Governments own research, making a pretty good fist of things.  

AMP's response has been a sizeable move into the SMSF space, buying up every Self Managed Superannuation business they can find in a strategic ‘if you can't beat 'em, join 'em’ move.  I recently saw a statement from AMP Financial Services Chief Executive Craig Meller where he said that to date the Australian SMSF segment had emerged as something of a "cottage industry" that was now "ripe for industrialisation".  Well I've got news for any large fund manager who wants to "industrialise" Self Managed Super.  Australians are voting with their feet and moving to SMSF to escape the superannuation "industralisation".  Any positive move into the SMSF sector needs to be accompanied by a very un-industralised "sorry".  When that happens the healing might begin.

What do you think? Post your comments if you feel as strongly about this as I do or feel free to Contact Us if you want to have a chat about your superannuation.