Using SMSF funds to buy a property I can live in?

Hello everyone!

There is company called Home First that uses up to $200k of your super to set up a SMSF that you can then use to buy land, build on and live in.

Can this be true and what are the catches?

Thanks

 

You cannot live in a house owned by your own SMSF as you are getting a benefit from your fund. @Paul@PFI has covered it several times over.

 

That would be a breach of the SIS Act.
Members cannot live in property owned by their own SMSF

 

Thanks I'm new to the forum and did not see it in chat searches.

Just wondering then how this is done then? They are certainly advertising that it can be done.

 

They want to create an SMSF for me with $200k and then I think their property trust would buy the property and I guess I make repayments to the trust or something like that. I don't understand it to be honest.

 

Where did you see it?

What they might be doing is to get people to invest their super into a pooled fund or trust of some sort which then makes a loan back to the person who then buys a property in their own name using that as deposit.

 

It could be. I did not understand it. That old saying if it sounds too good to be true it is probably is. If they did what you say could I then live in it?

 

Yes, but could still potentially be a breach of the SIS Act. But you would think they have had proper legal advice if they are marketing this.

Do they hold an AFSL?

 

I honestly don't know and yes I did have to google the acronym.

 

Don't buy investments you don't understand.

 

Link please

 

Home First - $5k Deposit on Brand New Homes in Sydney.

 

Have you downloaded their ‘guide’ and read it and understood it?

 

Nothing I searched brought up super or SMSF.

"How Does It Work?
I fill the gap between what you have saved and the deposit you need to buy - So you can buy now!!"

They lend you the difference between your savings and the 20% deposit.

"Question 4 - Tell me about the homes available…
We have a range of homes available ranging from 1 bedroom apartments to 4 bedroom free standing houses!"

Doesn't look like you pick a property & they stump up the cash, you pick from their properties or that they lend you the missing 80% of the purchase price either.

 

Home Smart do not seem to offer that option. They offer "sub prime" low upfront deposit arrangements with very high leverage (and I may assume rates that match the risk). as they make up the deposit shortfall with a further loan. Likely a second mortgage or even worse a non bank lender who you are the mercy of with no prospects to refinance until financial circumstance changes. This means a LOT of interest until their additional loan is paid out using equity release. How many people will build 60% LVR after having 100% LVR so quickly if facing massive leverage ? And at what rate ? And what occurs if income drops to single income ? Rare to find buyers in such a situation able to wipe 40% off their loan quickly.

I can think of many many reasons why such a arrangement would be non-compliant if super was involved. I have doubts that Home Smart would even allow it as they would face massive penalties if they even mentioned super as a element of these arrangements. I welcome a private email with details if they do.

 

It seems they recommend brand new property too.

 

Where is the link to this?

I couldn't find any reference on their site when Google'd "Home First"

Same here.

 

They discuss it at their 'information sessions'. That was the first I was aware of it too until then.

From what I did understand there is a real estate trust involved but not sure what that has to do with setting up a SMSF on your behalf. Maybe it means they can access the money. I don't know.

 

Sounds very "Park Trent".

Cheers Ivan

 

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