Has superannuation become a good vehicle to invest in residential real estate? Why or why not?

Jennifer Hawkins looks good in anything, right? But how much hotter is she in a swimsuit?

Similarly, residential property has always looked sexy in super. Super, like a bathing cozzie, is a skimpy tax environment.

Recent superannuation rule changes have put property in a bikini. Now, it’s smokin’ hot! The hottest super model of the super world.

But first things first: Residential real estate is for self-managed super funds only. It’s not available in your average super fund.

The recent rule changes relate to gearing. SMSFs can now borrow to invest.

Previously, buying residential property in your SMSF required having the purchase price, plus stamp duty, in cash – a minimum of around $450,000. Few had enough money.

Now you can buy residential property in your SMSF, with (technically) $0 down and fully geared. However, most lenders will lend 80 per cent (max) of the purchase price. Therefore, your super fund would need an absolute minimum of $150,000 (plus high ongoing contributions) for a $400,000 property, to allow for some diversification and funds to cover negative gearing in the early years.

For those comfortable with regular property gearing, the new gearing rules are potentially exciting.

But it’s for a limited few, experienced, investors. Gearing doesn’t suit everyone. Neither are the complexities of SMSFs.

And them together and geared property in super is a super-complex investment strategy that requires complicated trust structures and professional help (financial advisers, lawyers and accountants).

Effectively, you need many stars to align for your circumstances. But if they do, geared property in a SMSF is looking a little like Jen.

Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.