Hi, We are looking for broker who does/service SMSF loans to buy property We are located in Western Sydney. Is there anyone in the forum?
What @Trainee said What is your reason for buying in SMSF? Have you exhausted your borrowing capacity in your own name? With SMSF you will need to provide personal guarantee, which may impact borrowing capacity for you moving forward. What is your goal with property investing?
I remember some of the brokers in here saying that personal guarantees in SMSF won't affect borrowing outside
We have already set up SMSF fund over a year now, and due to unforeseen events, we have not done anything. So looking at the possibility to buying a property in near future. to an extend we have exhausted our personal borrowing and currently we don't want to buy any via too.
The lender depends on the SMSF funds, many of the mainstream lenders expect minimum fund balance and liquidity requirements. Expect to pay dearly as the interest rates approach 6% for P+I loans.
The broker cannot address the custodian trust or many other areas of advice before a loan application. I can provide details of several great brokers but I dont refer SMSF enquiries without discussion. Too many concerns to explode and create harm Call me and we can see if I can share some names
I am in Western Sydney. But won't advise the trustee on the financial issues. I will only cover the lending advice and legal/tax advice (thru my law firm) - if requested.
Why not? If your SMSF is set up, and you plan to borrow inside a SMSF - you will need set up a Limited Recourse Borrowing Arrangement or "Bare Trust" as its know. This will generally require financial advice to determine whether this is in your best interests. This will be an additional expense for you in addition to setting up a company and bare trust. We do this for all our clients. At the same time, you will have advice on what your strategy is and generally include a loan assessment based on a number of factors including your current super balance and contributions to super to determine an amount to purchase. In this exercise a cash flow analysis is performed inside and outside of super. This may seem painful but this is what the Royal Commission is about, and for us, we do this in extreme detail covering all aspects. Be prepared for the goal posts to change, but established property as there is more certainty - off the plan is tough as lending changes as believe me i'm going bald for a reason.....the banks have you by the you know what. Reduce uncertainty and get a pre-approval before you sign a contract and do your due diligence. Sorry I did not respond to your message @Newbie, but this can give you the detail you need - assuming you don't have a bare trust set up. Cheers Ivan
You need to speak with @Redwood (Ivan from the post immediately above). SMSF is a very complex environment to be buying property through and goes well beyond the loan itself. I'm purchasing property through an SMSF myself at the moment and Ivan is the person I went too.
@Newbie As your SFMS is already set up part of the work is done. Check with your accountant the structure required to borrow. Bare trust is required. I have our loan through Commonwealth bank. Was almost identical process to a normal loan. It took longer to set up but that was it. Your accountant will have to books yearly and do audit.[Smsf] Ranging from $2000-$3000 for good accountants or $1000 for online options. Smsf is great vehicle and yes it didn't affect our borrowing capacity for. Our recent loan. It's a different entity to you so no questions asked. Smsf have great advantages and some restrictions. For us it was simple and easy. Our bank and accountant made it a breathe.
Not really the question here , but taking many borrowers looking to invest in smsf resi property are already long on resi property and the further concentration risk into the one asset class can often be shown to not be in the members best interest. Many times we find the desire is about " sratching the itch" and satisfying the next deal rush, or a lack of understanding/education in equity markets or other options. Not a brokers role per se, but you get some interesting responses when one challenges your comission and asks ........ why ? ta rolf
One of the serious mistakes some make is they adopt the high LVR (neg geared) strategy of normal investing and use this view in a SMSF. That may be a massive error. As a SMSF pays tax at 15% or less a neg gearing strategy is highly ineffective. You end up needing a constant stream of contributions which are consumed in servicing the debt. The fund goes nowhere. And without any property value change the fund literally goes nowhere. Reliance on possible asset growth alone may be a poor strategy in super. Given that most property takes 3-5 years to break even in this environment that could be a high risk. Some issues: - Rollover from industry funds etc and loss of life and TPD cover - Loss of employment or change of employer limiting contributions required to fund a poor asset choice. Forced sale may occur. - Using a SMSF strategy with non-spouse parties. ie Two couples - Using a SMSF with adult children without complete understanding of the risks and limits - Using a SMSF to buy a lifestyle asset (holiday let) - Lack of diversification consistent with each members age and needs - Failure of each member to truly consider their personal wants. I have seen some spouses later argue they didnt want the property !! This indicates a mismanaged fund. Each member should be equally involved. - Later marital breakdown - A SMSF will truly add complexity - Failure to truly consider annual costs v's other alternatives. A $3Kpa cost may be fine for a single SMSF with two members but v's what balances (?) and some choose to retain former funds which can multiply costs - Failure to have settlement extended to provide sufficient time for the more complex SMSF loan. - Estate planning aspects of super. - Ignoring preservation. A SMSF that does make a profit etc cannot use the equity OR release profit so strategies that work outside super may fail inside super - Not seeking financial advice. The DIY path is fraught with countless errors that can be made. I have seen some bad choices based on no advice.
If you get good financial advice the other issues are far less likely to be a problem. I've learned that the hard way.
