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SMSF Lending?

Discussion in 'General Property Chat' started by Ben Murphy, 29th Apr, 2016.

  1. Ben Murphy

    Ben Murphy Member

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    Hi Guys,

    If anyone could answer this question I would be forever greatful. I made the mistake of setting up a SMSF last year, the reason being is because I spoke to someone at Bendigo bank and they assured me at the end of last year that I would be able to use the $120k I had and I would be able to borrow up to $400k and I get an email today after speaking with him over the last few months that the recent changes to the bank make me not eligible to borrow. Anyway I need a bank if anyone knows of one that can provide me with a loan at around 5.5%, as most have the liquidity test. (I.e must have either 200k or 10% left in my account that is the value of the loan.)

    Any help is much appreciated as I am now really keen to find a bank that can help. La Trobe advised that they could but it would be 7.2%, not a chance!

    Cheers,

    Ben
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Your best bet is to use a broker who is experienced in all the rules surrounding this. Corey has setup some similar deals for us.
     
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  3. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Not sure if I understood the question but you want a SMSF lender that has a no minimum fund/liquidity requirement?

    If so then get your broker to speak to Bank of Sydney - we use them a lot since late last year but their servicing is very conservative.
     
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  4. Ben Murphy

    Ben Murphy Member

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    Corey? Do you have his details please it would be very much appreciated. Many thanks, Ben
     
  5. Ben Murphy

    Ben Murphy Member

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    Thanks Shahin, much appreciated.
     
  6. D.T.

    D.T. Adelaide Property Manager Business Member

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    He posts on these forums as @Corey Batt
     
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  7. JacM

    JacM VIC Buyer's Agent Business Member

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    Hi @Ben Murphy

    Before getting too stressed, take a peek at your balance and how soon it is likely to be $150k. My understanding is that a few of the major lenders do 80% lend and no liquidity if you have $150k in your SMSF.
     
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  8. Jeah_

    Jeah_ Well-Known Member

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    @Redwood has expertise in this area too, and could more than likely give you some options
     
  9. tobe

    tobe Well-Known Member

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    Maybe you missed a bullet? Just wind up the smsf and roll it back into an industry fund. Lesson learned.
     
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  10. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    There are lenders which will look past the liquidity requirements, but rate isn't always that great. JacM has raised a good point - if you can get to 150k net assets prior to the transaction there is some VERY competitive products sub 5.5%.

    I wouldn't necessarily wind up the SMSF, you can just invest it until you have a stronger balance otherwise. At that level it won't take very long at all to potentially have a position to allow you to borrow with more success.

    Depending on the greater financial picture, you can always weigh up the options of making additional contributions into the fund to get to the point, age and greater goals will dictate this. Best to talk to an adviser/broker and get a plan in place, so you can move towards your goals, than get unwanted surprises like you've experienced with Bendigo.
     
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  11. tobe

    tobe Well-Known Member

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    If you have equity in the ppor or an investment property you could even borrow enough to contribute to the smsf and get to the minimum liquidity.

    Did the guy at Bendigo set you up with the financial planner at sandhurst trustees to set up the smsf?
     
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  12. Foxdan

    Foxdan Well-Known Member

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    We had a similar amount in our superannuation. We organized an internal loan from our own equity to our SMSF to satisfy minimum requirements. The company that set up and manages our SMSF arranged loan contracts between the SMSF and ourselves to ensure it ticked all the rule boxes. Might be a simple option for you.
     
  13. JacM

    JacM VIC Buyer's Agent Business Member

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    Be very careful about lending your own money to the SMSF. This is known as a Related Party LRBA and there has been changes to this space. Speak to your SMSF accountant. You will likely find he/she will tell you to steer well clear of the idea. Instead perhaps consider salary sacrificing some wages into super and/or opening a SMSF term deposit until your balance hits $150k
     
  14. Redwood

    Redwood Well-Known Member

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    Hi Ben -

    If La Trobe is quoting 7.2% there may be an issue with the security, their rate for resi is 6.59% and 7.19% for commercial, so the 7.19% is used for complex resi (i.e student accom, poor post code) which is funded through the mortgage fund.

    As stated in another thread, the following lenders require a min balance of $200k:
    CBA, Macquarie, Resimac

    Mac and Resi has a 10% liquidity test and CBA 6 months interest.

    St George can do it but I assume you may have visited there? again 10% liquidity test, there is a way to overcome this though.

    Bank of Sydney is inexperienced in this area in my view, you can visit a branch to make it easier. They have min requirements too. Assume your security is established.

    There is a non bank lender that stopped lending due to APRA crackdown, however we are sneaking a few in a month....

    The other and last priority is Liberty, have you tried them? be careful with their sign offs before settlement....don't like them at all.

    A good broker will guide you through the minefield.

    Hope that helps
    Cheers Ivan
     
  15. Redwood

    Redwood Well-Known Member

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    Hi there - Related party lending is quite simple, there was a tax ID released this week with clear guidance on RP loans, I use this strategy effectively and do many of my clients. Put simply, interest rate must be 5.85%, regular interest (monthly payments) and P& I....unfortunately the ATO has been extremely poor in guiding SMSF on what is commercial - and then come out with a ruling 3 months before June leaving a lot of SMSFs at risk of 'non arms length income'.

    For new loans, its easy, refer to the table https://www.ato.gov.au/law/view/document?Docid=SFR/SMSFR20094/NAT/ATO/00001&PiT=99991231235958

    Cheers Ivan
     
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  16. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Why is your view that Bank of Sydney is inexperienced?

    They definitely don't have a minimum fund requirement, are a surprising large and very well run secure lender. The only issue is their servicing.

    Re Liberty - they actually do have a minimum fund requirement. They require the SMSF to have at least 20% of their invested outside of the security property.

    Re Macquarie - they don't have a minimum $200k fund balance requirement. Their requirements are like St George whereby they only require 10% of the loan amount for members up to 60 years old and 20% of the loan amount for members up to 60 years old.
     
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  17. JacM

    JacM VIC Buyer's Agent Business Member

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  18. Ben Murphy

    Ben Murphy Member

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    No he didn't, but a lesson learned that just because he is a business manager doesn't mean he knows what he is talking about. Thanks Ben
     
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  19. Ben Murphy

    Ben Murphy Member

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    Hi Guys,

    Thanks so much for all your feedback, I know the benefits of taking this to a Financial Adviser, which i am doing to put together a plan. I like many other people have kids and am just looking at setting them up for the future. I have bought a few investment properties last year that are doing well, when I say investments I mean something to give my kids when they are old enough to take over the loan and instead of them having to pay a $2m plus mortgage when they get older they enjoy the benefit of capital growth and a $450k loan. Not sure if this is the right thing to do but sounded logical in my head. We have a house in Sydney (botany) that has more than doubled since we bought it seven years ago and have used the equity from it. So as long as we have that and a good SMSF we should be fine. Right? Lol! Wish I studied a little harder now! ;-)

    Thanks again to all of you as your feedback is very much appreciated. I can see that all of you either work very hard in the field or are experienced in property or both. I will of course do my due diligence to make sure that I tick the boxes so to speak!

    Once again I really appreciate your time, as I have had the worst week and this has made me feel better that people have the time to respond and help out!

    Have a great weekend!
    Ben
     
  20. JacM

    JacM VIC Buyer's Agent Business Member

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    Hi @Ben Murphy

    Those investment properties you bought to give to your kids when they are older... did you buy them in your own name, or in a trust? Some buying entities are more effective for this sort of thing than others.