Trustees advised to de-risk commercial property
SMSF investment in commercial property carries more risk than residential if a “multi-tenanted” approach is not taken, according to a property group chief executive.
Speaking at the Institute of Public Accountants’ 2014 Tasmanian Congress, Spencer Property Group chief executive and national director of Propell National Valuers Kel Spencer said commercial investment in property plays a “significant” role in the Australian investment landscape.
Mr Spencer also told SMSF Adviser he thinks investing in commercial property is “perfect” for trustees and produces higher yield than residential if it is “de-risked”.
“We see a particular style of [commercial] property being ideal for SMSFs, and that is the multi-tenanted properties that are well constructed and well located, so they are able to be re-leased if you lose a tenant,” he said.
“I think there is always a bit more risk in commercial, but you can de-risk it with the multi-tenanted approach."
Mr Spencer added that transferring a business premises into an SMSF is a “fantastic thing to do”, with trustees paying less interest than they would in rent.
“Certainly with low interest rates they are going to pay a lot less in interest than they would be in rent, so it puts your business on a better footing,” he said.
“The only thing is it doesn’t give it the flexibility. If the business grows you haven’t quite got the flexibility to come to the end of the lease and then go and lease something bigger.”