In recent years, Self-Managed Super Funds (SMSF) have grown considerably in popularity, particularly for purchasing both residential and commercial property.
SMSF allow people to control their own retirement savings and invest them in the best way they see fit. This is different from traditional superannuation, that is invested by funds on their behalf.
While property makes up a small percentage of the overall investments that are made by SMSF, this is something that is growing. However, loans for SMSF are not always easy to obtain and the rules around them are changing all the time, especially from the big banks.
Buying Property
An SMSF is able to purchase residential property, however there are a number of rules and restrictions that come into effect.
If you buy residential property through an SMSF, the trustee of the fund or anyone related to the trustee, cannot live in the property. Similarly, no one related to the trustee may rent the residential property.
The ‘sole purpose test’ is used to make sure the investment is only used as a way to provide retirement funds to the members of the SMSF.
For that reason, it is also popular to buy a commercial property through an SMSF, as a business is able to purchase a commercial property through an SMSF and then lease it back.
SMSF Loans
While it is possible to get a loan through an SMSF, they are bound by a number of restrictions that can make it difficult.
One of the key elements is that the debt taken on by the SMSF must be non-recourse, meaning that if the lender needs to recover losses, they can do so by selling the assets and there is no personal guarantee. What this means is that SMSF are often highlighted by low LVRs and can be difficult to obtain.
The first place to start, if you are looking to invest through an SMSF or to get an SMSF loan is to speak to your mortgage broker, accountant and financial planner. This is a complex area which changes regularly and you should seek advice prior to making any investment decisions.
If you have a question or would like more information, please contact…
Steve
Mobile 0423 894 864
steve@bettermoneylenders.com.au
Brett
Mobile 0428 156 680
brett@bettermoneylenders.com.au
