Buy, but beware of pitfalls

Self-managed super funds have pumped about $73 billion into residential and commercial property markets, with investment in commercial property increasing 83 per cent since June 2008.

However, experts warn that many investors are not aware of the pitfalls and penalties involved for those who fail to get it right.

Dixon Advisory head of property Tim Coates told The Australian yesterday that investors often failed to comply with the complex legal structure that needed to be set up in order to borrow inside a self manager super fund.

Loans could be set up incorrectly, contracts signed in a personal name, and payments made on the purchase from personal funds rather than from self managed super funds, Mr Coates said.

"There is lots of scope for people to make errors and those errors can be very expensive because with property you're dealing with big transaction costs -- stamp duty is obviously the biggest one,'' he said.

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