What is the difference between a 2 part contract and a single part contract and why do I need a single part contract?
Every new residential house and land build starts off as a 2 part contract: one contract for the purchase of the land and a separate contract to build the house. This isn’t allowed directly into a SMSF if there are borrowings attached to do this. The SIS Act – Superannuation Industry (Supervision) Act 1993 – instructs that any residential property purchase inside a SMSF, if there are borrowings attached, needs to be done as a single part contract purchase. A single part contract is where the entire transaction, the land and build, or the completed property, is done as a single part contract.
How can I find a new house and land that is sold as a single part contract?
Superannuation Smart Property works with facilitators who provide the single part contract solution. They act as a third party to turn a two part contract into a single part contract, ready for sale to your SMSF. Previously, investors wanting to invest in residential property inside their SMSF were limited to apartments, townhouses, existing property, or the occasional build that a builder could carry right through to completion themselves and sell as a single part contract. We now provide a large range of ‘already packaged’ single part contract NEW houses and land builds ready for purchase by your SMSF.
What sort of properties can I purchase through Superannuation Smart Property with my SMSF?
We have access to standard house and land, dual key, duplex, rooming houses or NDIS. However we can also assist you turn any 2 part house and land package you find yourself, into a single part contract. Talk to us for more information and we can very quickly calculate this for you.
Does it cost more to purchase the same property as a single part contract inside my SMSF?
Yes, there are additional costs involved by the third party to provide this service, however these additional costs are generally seen to be far outweighed by the benefits of investing inside a SMSF when you consider the tax advantages and capital gains tax benefits. Your financial advisor can instruct you in this area.
Can you provide me with financial advice on whether this is a suitable investment strategy for me and my SMSF?
Unfortunately not. We can certainly assist you with finding a great property that meets your price range and works with the deposit you have, however we are not financial advisors and cannot advise if this is suitable for your own personal needs. We strongly recommend you have this conversation first with your own financial advisor, or can certainly recommend a few that we know our clients have had a great experience working with.
What are rooming houses and what is co-living? Can you explain the difference?
Absolutely. We tend to differentiate between the two, more based on the layout of the property and what is contained in each room or ‘suite’. Rooming houses are purpose built class 1B builds that contain mini suites, sometimes referred to as ‘micro apartments’ – with each suite having its own bedroom, bathroom, small kitchenette and living area. Usually they have an outside area as well. They are contained in one house with a main communal kitchen (that contains the oven) and there is a communal laundry. Some may also have a small communal living area with the kitchen. Co-living is more a class 1A build house with each bedroom having its own bathroom (occasionally they may have a small kitchenette too), but the house has the communal living, dining, kitchen and laundry. The main difference being that the rooming house suites are more independent living. There may be some variations of this, but this is a general overview.
What are NDIS properties?
NDIS properties are properties that have been built to comply with NDIS standards. The NDIS is the National Disability Insurance Scheme, an Australian Government organisation that provides funding for people with disabilities to be able to live in NDIS certified accommodation. The NDIS provides financial support for accommodation which can be attractive to the investor, although the properties, being built to NDIS requirements, can be more expensive to build than a general home. Within the NDIS there are 4 levels: High Physical Support, Fully Accessible, Improved Livability and Robust. NDIS houses tend to be built to cater for one or more of these categories.
What is the difference between dual key and duplex properties?
Dual key properties are on one title and tend to provide 2 separate attached dwellings that can each be rented independently of each other. They are often a 3 bedroom on one side and maybe a 1 or 2 bedroom on the other side, although there can be other combinations of this. A dual key property can only be sold as one entire property. A duplex property is 2 separate attached dwellings that are on separate titles. Each side is a full unit within itself and can be sold separately to the other side due to the separate titles.
How much deposit is required for me to be able to purchase a standalone house and land package?
Depending on the property and which facilitator is used to provide the single part contract sale, a 20-35% deposit of the single part contract price is required to proceed. This would come from your SMSF balance. You would then get a 65-80% LVR loan to settle.
So I have found a property on your website that I like, what is the next step?
Reach out to us either by phone 1300 40 10 40, email info@superannuationsmartproperty.com.au or book in a time into our calendar here to meet and we can discuss this with you.
We need to ascertain that you already have your SMSF setup and your funds rolled over from your industry fund before we can seriously look at available properties. The reason for this is that properties, especially land, are selling at an incredible rate at the moment, with many land developers only holding land for 24 hours! When you find the property that you like, we need to confirm with the builder that the package is still available (as they really do move that fast!), and then get a hold on it. We would then let you know that this is available and you would need to be ready to say “go”! Getting all your ducks in a row beforehand, really can mean you are ready to move when the time is right.
What is the process for purchasing a single part contract property from Superannuation Smart Property?
Once we have established (as above) that you have your SMSF setup, funds rolled over, bare trust in place (or ready to be setup by your financial advisor), and the property is available, you will need to fill out a sales advice form that we will provide, and pay a $10,000 deposit (plus any additional fees that the land developer or builder requires). Once this is paid, the land and build contracts are requested and turned into a single part contract. This will be sent to you for you to review and sign. Once signed, the balance of the 20-35% deposit (less the $10,000 and any additional funds paid) is paid by your SMSF and you are in contract! You then sit back and wait for your property to be built. Normally there can be a few months delay when you don’t hear anything, which is usually when your property is going through council, but then you will be kept up to date with all the stages throughout the build. You will be notified 3 months out from the expected completion date to speak with your mortgage broker to get your settlement funding in order, and once settled, your SMSF owns the property.
I don’t think I have enough in my SMSF to purchase a standalone property.
Fractionalized investing might be a good option for you. This is where you can purchase shares in a high yield property, in 5% lots, that are currently earning up to 11% per annum, paid monthly, however you also get your name on the title as ‘tenants in common’, so will be exposed to capital gains on the property as well. You can sell your share at any time too. This option is available inside or outside super.
What are the other costs associated with buying a single part contract property?
You will have stamp duty on settlement, plus conveyancing costs. Of course, there may be costs associated with any financial advice you choose to seek prior to the purchase too.
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Disclaimer: Superannuation Smart Property does not provide financial advice and recommends consulting a licensed Financial Planner for all financial advisory needs.