SMSF to buy commercial properties?

How bad are the interest rates and how low is the LVR for a SMSF to borrow a bag of cash for a commercial property?

Thanks in advance

 

Doing a SMSF purchase at the moment through @Corey Batt and its 5.something at 65%

 

Thanks Dave.

 

Then you have to jump through the hoops to get a smsf deal.. 10% net equity issue...

A lot of lenders don't want to do them anymore so put so many restrictions around the deals that they are sometimes not worth the effort..

 

I thought the 10% liquid assets rule is only for residential?

 

10% liquidity only applies for some residential lenders (Macquarie, St George, Westpac, etc) - it doesn't apply to commercial loans.

Interest rates for commercial loans within an SMSF will be dependent on LVR. Most lenders will do around 65% LVR and rates will vary from high 4's to low 5's. With commercial lending you can also blend the fees into the rate so be wary of this when comparing apples and apples.

 

Thanks Shahin. Does anyone do >65% LVR?

EDIT: does it matter if it's individual or corporate trustee as well?

 

With SMSF commercial consider a related party loan also if its your own business.

SMSF commercial can borrow up to 70% and rates will vary depending on the lending. Pay particular attention to the application fee - valuation fee and legal fees.

Some non bank lenders include a hefty application fee which includes risk fee which will be % of loan whereas others include a base fee. Valuation fee can be up to $1300 (depends on lender). Legals of $1000 plus....

Allow at least 45 days from contract date. Rates will vary based on scenario and location of security. Ensure your bare trust is done right first time otherwise it can get messy.

Always!! corporate trustee for SMSF and Bare Trust also...
Hope that helps

Cheers Ivan

 

Just looked up my STG docs, 5.4% at 65%, P&I.

No val fees as they took COS value, circa $4k in app and legals for lenders side.

Bare custodian trust with new corp trustee and a special purpose SMSF with seperate corporate trustee.

Settles tomorrow

 

La Trobe will do 70% LVR and they do a loan term of 25 years but you pay on the rate. Keeping the LVR to 65% gives you much better options.

Not a lot of benefit legally and finance wise to go individual trustee - best to keep it as a corporate trustee.

 

Well done Dave M - dirt cheap.

Cheers Ivan

 

Thanks - its the office building my business leases, optioned it at leasing a year ago. Its been rezoned in the interim as part of The Hills Council rezoning for the rail link and so has seen a significant value increase since.

 

See Dave M - perfect strategy - the majority of SMSF loans are these, small business using it as a strategy - yet some much press over LRBAs - great strategy. I do the same.

Cheers Ivan

 

75% is possible. You will pay for it though 7% pa.

• Loan size up to $3 million
• No ongoing fees or charges
• No regular property revaluations
• Interest only up to 5 years
• Principal and interest terms up to 25 years
• Fixed or variable rate and split loans
• Interest cover 1.5x on actual rate (not stressed)
• Loans above 70% LVR must be principal and interest
• Personal guarantees of members required above 50% LVR

Interest cover is determined on:

• Established member contributions
• Income from the property being financed (80% of gross income pa)
• Income from other assets in the Fund

 

How have you found Thinktank Marty? I would use them as a last resort ...however everyones experience is different. They also have a min Net assets test of $250k.

Cheers Ivan

 

Might be easier to stump up the extra deposit than copping that 7% interest rate.

Thanks all, now gotta hurry up sorting out the trusts and get moving.