Monday, September 17th, 2012
The continual modification of the rules relating to the way in which property investment is dealt with under Self Managed Super Funds are making it difficult for Self Managed Super Funds to access a potentially lucrative source of returns, according to Mark Butler, Managing Director of Otan Property Funds Management.

Speaking as the chair of a break out session at the Chartered Accountants Business Forum in Perth, Mr Butler identified a number of areas that make property investment challenging as part of a SMSF.

“Controls on the level of debt, the number of properties that can be purchased, who rents them and how a property can be developed are just some of the main areas of concern,” Mr Butler said.

“Property is potentially a very exciting investment option for people with SMSFs, but finding a way to incorporate it into a fund can be confusing and getting accurate advice can be expensive.

“Developing property as a Self Managed Super Fund is difficult, however a fund like Otan achieves this easily, with no need to sort out the web of guarantees provided by different entities.”

Research recently commissioned by Otan forecasts a significant tightening of the property market, with underlying demand exceeding supply in 2012 and 2013 and the strongly performing Western Australian economy providing a framework for first homebuyers and investors to return.

“The forecasts for the WA property market make it an ideal investment opportunity for SMSFs,” Mr Butler said.

"Strong construction and mining figures – which contributed to a 1 per cent growth in GDP in the September quarter 2011 – provide a solid foundation for accelerating growth in 2012 and 2013.

"Continued investment in major projects – with $147 billion of projects currently committed or under construction and a further $160 billion planned in WA – will continue to drive economic growth and associated wage increases, while low interest rates and higher rental rates make purchasing an attractive option."

"Overall, the strong performance of the WA economy will continue to generate the fundamentals needed to support longer--term value generation from investment in real estate," Mr Butler said.

The Otan Property Fund has been specifically designed to address some of the challenges for SMSFs when it comes to investing in real estate.

The main advantage of the Otan Property Fund is that while the development site is always bought outright with no encumbrances or debt, pre sales are then used to cover any construction debt.

“This effectively means that investors are not risking anything more than the amount they have invested – which can be as little as $25,000,” Mr Butler said.

“We further manage risk by appointing builders on a fixed price/fixed time contract, and ensuring that the residential properties are set within the median price range for the location – which is a proven strategy for minimizing the risk from fluctuations in the property market,”

The investments work on the basis of turnover rather than escalation in property values or rents.

Institutional and Institutional Superannuation funds represent almost 65% of the funds currently under management.

“The institutional super funds recognize that the structure of the Otan Property Fund and the strategy that underpins it are ideally suited to SMSFs,” Mr Butler said.

“Some of these funds have over $7 billion under management with Otan.”

All of Otan’s current projects are in Perth, plus one major sub-division in Karratha, one of the North West’s property hot spots.

SMSFs can invest in a single project or spread the investment across a number of projects. As a benchmark, returns are estimated at a minimum of 20 per cent.

“The Otan Property Fund makes it easy for managers of SMSFs to access the lucrative WA property market,” Mr Butler said.

“This is achieved without recourse to debt, guarantees or related party lending, or the need for lawyers to complete the sale. All the hard work of researching the market and finding the right project has already been done by experts in the field.

“There is no need to deal with tenants or builders, or have any involvement in marketing or selling the property.”

Contact Profile


Otan Property Funds Management Ltd was established to make the most of a unique opportunity in the West Australian property industry. Otan has a retail AFSL licence and provides investors with the ability to participate in property investment opportunities mainly in Perth and Western Australia.

These are residential developments of apartments, infill site and broad acre subdivisions; and commercial opportunities of a passive nature which are based upon opportunistic acquisitions.
Lorelei Campbell, Soapbox PR
P: 08 9279 5226


Self Managed Super Funds, Investment, Otan



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