Self-managed Super Funds (SMSFs) are looking to commercial properties as investment vehicles for their members. According to the Australian Taxation Office (ATO), over 15 per cent of total assets held by SMSFs are invested in commercial and residential properties. This figure adds up to over $400 billion.
Under government rules, this type of fund has always been able to invest in real estate. In the case of a commercial property, a business owner who owns his or her own premises is allowed to transfer it into their super fund. This is the most common type of commercial property which is held within a SMSF. The trustee uses the property for his or her own business, on a leased basis.
Under the current rules, only one property may be bought under a separate borrowing arrangement. A property cannot be improved once it has been acquired under the agreement. It can be repaired and maintained, however.
SMSF investors who are interested in buying retail commercial properties right now could expect to get yields in the 4-5 per cent range. Returns on investments in the industrial sector are much higher, coming in at approximately nine per cent (or higher in some instances). Office buildings have the potential to bring in an even higher rate of return for investors, with suburban office buildings and business parks offering close to 10 per cent yields.
According to Steve Gillard, the managing director of GDI Property Group, the demand from SMSFs is very strong.
“We only do office buildings: our investors put in as little as $50,000 to whatever they like, and they get a piece of a CBD office investment. It’s an opportunity they would not get on their own. 90 per cent of our investors are SMSFs.”
