What types of property can you purchase
- Off the plan
- House and lan
- Units and Houses
- Business premise
There are 3 three types of funding mechanisms
We can show you which solution suits you best and provide a financial plan via our advisory partner firm – Freedom Wealth tailored to your personal needs.
The SMSF Lending Criteria is complicated and getting harder to navigate. With over 11 years experience, we can help you navigate this space to acquire a property with the least amount of stress and worry
Lending policies for SMSFs vary between lenders, particularly in the way they assess your ability to repay the loan.
These are the 3 key things to consider
The main hurdle encountered by most SMSF applicants is proving that there is sufficient income in the trust to support the loan.
Typically, the banks will look at the current income of the trust based on its previous two years tax returns and will then assess if that income plus the proposed rental income will be sufficient to service the debt.
Some lenders can also use the income of members or beneficiaries of the SMSF to support the application if a personal guarantee is provided.
These are examples of SMSF property strategies that are harder to get funding for:
You cannot sell a residential property you own or one a relative owns to your SMSF
You cannot renovate a SMSF property with a separate loan
You can buy commercial property and sell a commercial property you own to an SMSF funding is more expensive for commercial than resi property
The super laws ( SIS Act) restricts how an SMSF may borrow money. An SMSF cannot borrow money directly or leverage the fund. It must use a related entity as per ( section67a and 67b) or a bare trust to borrow at arms length using a LRBA or an SMSF loan, to protect the other assets of the fund and its sole purpose.
When you borrow money to invest in property via an SMSF, the following needs to be addressed:
Most lenders are finding the falling property values and new lending restrictions from APRA
Imposed on lenders means that there are strict rules they must abide by
Some lenders such as CBA and Westpac are pulling out of SMSF lending.
There are mainly, second and third tier lenders and hybrid solutions available in the market at Present.
You will need to get pre-assessed and commence an application promptly to get an SMSF loan
Typically between 5-8 weeks is normal, as these loans are more complicated to process
Rates vary depending on the following
SMSF Loans are services using up to Three (3) forms of income
Its worth noting that if members are close to retirement age lenders may not accept super contributions in their assessment and they may restrict the LVR to 60% -50%, further the loan term may be reduced so the loan services.
Setting up an SMSF is not for everyone
Here are some things to check, before you set one up
There are special rules governing how super funds must be run:
*from 1 July 2019 SMSF’s are allowed to have up to 6 members in a fund
SMSF Property deals run the risk of triggering double duty. As the Bare Trustee owns the property, whilst the loan is in place, the super fund is only a beneficial owner. Once the loan is paid off, the property must transfer to the SMSF and the title of the property must be changed to the SMSF trustee.
If these arrangements are not attended to correctly, double duty may be imposed on the fund and its members when these steps are undertaken.
Stamp duty will be payable on the initial transfer from the property vendor and when the property transfers from the Bare Trustee company to the SMSF trustee company. Some lenders use their own custodian structure, so the transfer of title upon completion of the loan may also attract additional stamp duty charges! Unbeknown to the SMSF members. This highlights the importance of getting the right advice with these arrangements, before selecting a lender.