With uncertainty around the growth outlook for residential property, coupled with potential changes to negative gearing and capital gains tax, Self-Managed Super Funds should consider investing in alternate asset classes such as industrial property.
Interlink Strathfield in Sydney’s inner west is one such example.
Interlink is located on a prime corner site on Cosgrove Road and Cleveland Street in Sydney’s inner west suburb of Strathfield South. The Interlink Strathfield estate is directly opposite the Enfield Intermodal Logistics Centre and encompasses 65 strata title industrial units sized from 150sqm up to 1,000sqm and 23 strata title storage warehouse units sized from 23sqm to 84sqm.
CBRE’s Director Shaun Timbrell who is managing sales at the industrial estate, said there are numerous benefits for businesses to purchase their commercial premises through a SMSF.
“A major benefit is that rent paid through a SMSF can be claimed as a tax deduction as it constitutes as a company expense. Many investors prefer paying rent to their super fund, rather than someone else,” he said.
“The majority of commercial properties purchased through a SMSF are then leased back to a business operated by a SMSF member”.
“SMSF funds can invest 100 per cent of its money in commercial real estate if a member of the fund runs a business. A SMSF can also borrow to purchase a commercial property,” he said.
Banks say no more to using SMSF for residential
“With SMSFs no longer able to borrow from any Australian bank for residential property mortgages, industrial is a great alternate investment,” Mr Timbrell said.
“You could imagine there will be a rise in SMSFs purchasing commercial and industrial spaces to take advantage of these attractive investment options.”
As reported in The Australian (20 March 2019), the value of property investment loans held by SMSFs jumped to $39 billion by the end of the June quarter to make up more than 5 per cent of all assets in the $700bn self-managed super sector.
However, the structures have now come under pressure due to falling or stagnant rents in the residential sector and the reluctance of banks to finance such structures, particularly as the underlying residential properties are now rapidly falling in value.
Mr Timbrell said it could be alleged that banks aren’t recognising the same risk potential with the stronger performing industrial sector by continuing to allow loans to SMSFs being used to acquire industrial or commercial assets.
Higher returns than residential
Mr Timbrell continued that rental yields are generally larger in commercial properties than residential yields, so a company’s investment grows quicker.
CBRE estimates these to be 4.5-5.5% yields for industrial properties compared with 3-4% for residential properties.
“Industrial property is definitely an asset class not to be overlooked for investors looking for a stable, no-mess, low-risk asset with good rental yields,” Mr Timbrell said.
“There are numerous benefits to investing in industrial property over residential including yearly rent reviews, longer term tenancies (usually 3-5 years), large depreciation benefits and tax benefits, as well as minimal ongoing maintenance expenses. Typically, all outgoings are recoverable from tenants, which is not the case with residential,” he said.
Designed by leading Australian architect Rothelowman, Interlink Strathfield represents a rare investment opportunity suited to small businesses, SMSFs, trade contractors, logistic companies and e-retailers alike.
For enquiries regarding strata titled industrial units or storage warehouse units visit www.interlinkstrathfield.com.au
Or contact:
- Claire Barber, Primewest Development 0403 519 915
- Robert McLaurin, Niemeyer 0425 303 741
- Shaun Timbrell, CBRE 0433 302 979
