SMSF investment loans for Sydney

Discussion in 'Loans & Mortgage Brokers' started by Thomacino, 11th Aug, 2020.

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  1. Thomacino

    Thomacino Well-Known Member

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    Can the mortgage brokers provide the financial criteria for SMSF investment loans for;

    a) units >50sqm and <50sqm.
    b) dwellings

    Purchase price of $450,000 with +25% deposit or ($120,000 deposit), $1,000 monthly super contribution and $500 additional contribution to the super fund (salary sacrifice).

    The above is not taking into account the rental income from the said investment purchase which indicates $400 - 450/per week. I'd imagine the rental income would assist in the lending process, or does the rental income need to be established?

    Also, anecdotally I hear serviced apartments are not accepted as SMSF, care to share some light on reasons why considering it is an income.

    Am specifically after the rate, application fee, LVR requirements and other pertinent information I may have missed. I have no allegiance to one specific lender, and even second/third tier lenders are fine.
    Do not need redraw facility or other special perks attached to the account as it is a buy it and forget it investment plan.
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

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    The property needs to be established (no construction/OTP)
    Rental income doesn't need to be 'established' as in have a tenancy in place, although it helps. The valuation will show a rental estimate which can be used for serviceability calculations.

    Even with normal resi lending a lot of banks won't fund them, higher risk as they are mostly not long term rental leases, they are generally seasonal.

    Sounds like you need to engage a broker to run the actual scenario for you
     
  3. Thomacino

    Thomacino Well-Known Member

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    My broker is generally good, but she tells me there is only 1 financier, which I have doubts on.. appealing to the wider community if there are other options re SMSF loans..

    as always thanks for the input
     
    Lindsay_W likes this.
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The capacity for the fund cashflows and liquidity buffers are all factors that a lender consider. Typically a 75% LVR probably is not ideal for most smsfs as the fund will burn liquidity. While a lender may lend up to 80% LVR in practice thats not quite so simple.

    The lender will factor the rental income - or a % of it. And all the costs including interest. A probable loss.

    SMSFs cannot have redraw. Its prohibited. A lot of knowledge seems missing. Serviced apartments are resticted by any lender as they are a poor form of security. Costs will be high, rates very high and the smsf annual costs should be understood. If this proposed property is likely to be the fund sole or predominant asset it could even be a concern for the fund investmnet strategy when it is reviewed by the auditor. The ATO recently wrote to tens of thousands of funds about this concern.

    A SMSF is not a "forget it" structure.
     
    Last edited: 11th Aug, 2020
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  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    SMSF lending has very different rules and guidelines versus normal residential lending.

    We need to know:

    1. Is this an OTP or established dwelling?
    2. Can you service (borrowing capacity wise) outside of the SMSF or only within the SMSF?
    3. After the purchase how much is your super balance within the fund (as in cash)?
    4. Are you self employed or PAYG?
    5. Is the location of the security in a High Density area?
    6. Does the 25% deposit include stamp and closing costs or can you fund this?
     
  6. Thomacino

    Thomacino Well-Known Member

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    The proposed SMSF will be a buy it and forget it plan, meaning I don't want to be looking over the management of the funds on a frequent basis. At best if the main investment driver is of property nature the thing to look out for would be the management fees of the fund and the property.

    I don't think people are checking the financial status of their property investment on a monthly basis.
     
  7. Lindsay_W

    Lindsay_W Well-Known Member

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    Personally there are about 4 lenders I know of in this space, there may be more that I'm not aware of (don't do many of them) most have different qualifying criteria/limitations
     
  8. Thomacino

    Thomacino Well-Known Member

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    1. Established dwelling.
    2. Combination of both. Intend to salary sacrifice $500 per month on top of the rental income it will generate and the contribution from the employer of $1,000 per month.
    3. A reserve of $25,000.
    4. PAYG
    5. Syd Metro, other asset types are semi-regional, Bowral and the like.
    6. 25% deposit does not include stamp duty.
     
  9. Thomacino

    Thomacino Well-Known Member

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    Can you expand on their criteria/limitations?
     
  10. Lindsay_W

    Lindsay_W Well-Known Member

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    Amount of $ in the fund already and how much will be left after the purchase (if only $25K it may not be enough) location of property, type of property, serviceability (some will accept the additional contributions towards servicing, some won't)
     
  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Just completed settlement of a HD highrise 3 bed OTP unit in SMSF ............ was fun

    ta

    rolf
     
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  12. Lindsay_W

    Lindsay_W Well-Known Member

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    How long was that one in the pipe for? I was told OTP not acceptable :eek: probably for the best :D
     
  13. Never giveup

    Never giveup Well-Known Member

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    I know it iw an old thread and specific to OP question but kust wanted to ask

    How long (application processing time) does it take to get the loan (80%lvr) approved to buy an established house (4/2/2) ?
     
  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Warning - New smsf formations and rollovers now take time. Lenders can raise a myriad of issues for a newly setup smsf that rushes in. Usual process

    1. Setup smsf
    2. Rollovers completed and received by fund
    3. Known idea of lender approval potential (broker)...some do this first
    4. Company custodian trustee setup
    5. Find property. Consider legal advice on contract conditions etc eg Loan approval !!
    6. Consider extended settlement of 8 weeks (broker is wise to advise)
    7. Lender loan final approval
    8. Settlement
     
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  15. Never giveup

    Never giveup Well-Known Member

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    That is very good summary in point form @Paul@PAS - appreciate it.

    May I ask if Loans are not involved then Item number 1,2, and 4 can be done in 1 to 2 weeks and we are set to invest?
     
  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    These days its almost impossible. All rollovers are now a electronic process and I would be advising clients to allow AT LEAST a month if the sun moon and stars all align. As a consequence it now adds a bit in extra in costs and is unavoidable. People seeking to rush diy smsf formation wont see that one coming.

    Steps 1 - 2 alone will likley take 3-4 weeks.

    For funds wanting a loan this ussue means its now impossible to race into a smsf setup to buy property. You would be lucky to get the rollover to the new fund before the settlement was due so no lender will approve the loan. Lenders expect to see a established fund.
     
    Never giveup likes this.

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