How to manage property in your SMSF

Borrowing to buy property in an SMSF was a strategy advocated by many people a few years ago. If you had a substantial super balance and wanted exposure to direct property it made sense – prices were increasing, rents were rising, and vacancies were low. Cashflow is particularly important for SMSF’s as any borrowings must be paid for from the fund. That is, if the property is negatively geared the fund must have sufficient cash on hand to make repayments. A property generating poor cashflow can result in the need for otherwise unplanned payments into the fund.

Conditions in the Australian property market have changed markedly in the last 18 months. Whilst some have been brave enough to call the bottom of the market from a price perspective, matters aren’t so simple for those with property holdings in the SMSFs. For one thing, there is still a huge volume of supply yet to work its way through the market especially of newly built apartments. This is resulting in lower rents and longer vacancies with vacancies stretching up to 60 days in some Sydney suburbs.

Start the conversation early

Your property manager should make sure they are fully aware of when a lease is due to expire so that they have enough time to have a discussion with the tenant about their intention to renew. If a tenant indicates they want to stay then this can be arranged mitigating any uncertainty around leases ending, and if appropriate, exploring a potential increase in rent. If a tenant has indicated that they do not wish to extend the lease, a property manager in consultation with the landlord can see if there is anything they can do so they reconsider, or otherwise has plenty of time to advertise the property to reduce the impact of vacancy.

Certainty Property is the only property manager that offers a rent guarantee that pays the rent if your property is vacant or your tenant is in arrears. Our rent guarantee also protects you from falling rents. If you’d like to know more about how Certainty Property can maximise your cashflows, say hello via our online chat – we do property management differently.