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SMSF Buying land

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Quokka, 5th Nov, 2009.

  1. Quokka

    Quokka New Member

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    5th Nov, 2009
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    Perth
    Is buying land a legitimate strategy for a SMSF?

    My thought is to outright purchase an undeveloped block as a long term investment.
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi Quokka,

    As far as I am aware (and other forum readers are probably more SMSF aware than myself) as long as it is in the Investment Strategy is "may" be allowable. Naturally a single block of land is more risky than a block of land with a building on it. If your going to build on a block of land this is obviously a different story.

    Personally, I don't like two things. Number one is gold, I know there are some gold bugs on this forum, but I personally don't like it. Number two is empty blocks of land. Both just sit there and do not produce any income. Other assets will produce income which you can live off.

    IMHO any super fund with non-income producing assets is going to have a hard time paying auditing and accounting fees (and potentially rates and land tax for blocks of land).

    My 2c...

    Cheers,

    Dan
     
  3. Quokka

    Quokka New Member

    Joined:
    5th Nov, 2009
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    Location:
    Perth
    Thanks for the reply,

    I take your point about income and would be looking to diversify into some income producing assets as well. Currently my fund is in cash.

    I'm interested to know why you think there is more risk in an empty block. My thinking behind this is that there is less risk than the usual stock market route. I'm looking for something that I can buy and forget for ten years. If we are to see inflation returning, as many suggest, I feel land is a good bet.



     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Unless that land has a DA attached to it (or is zoned such that it can be built on with the relevant approvals), it can never be used for anything other than vacant land. This may restrict the market for the land and you may find that what you paid for it (or what it is nominally valued at) is actually quite meaningless if nobody actually wants to buy it.

    Since the land produces no income (in come cases you may be able to lease it out for agistment purposes - assuming it is in a rural area), your are completely reliant on growth in the value of the land - and depending on the nature and location of that land, it may well not be worth what you think it might. Yes, land has intrinsic value - but at the end of the day, that doesn't translate into a guaranteed sale price.