Use SMSF Loan for Making Investment in Residential Property
As an Australian resident, you can select to direct your personal contributions and super guarantee payments to an independently managed superfund or to own your Self-Managed Super Fund (SMSF).
If you are looking for SMSF loan, then our main responsibility is to manage your superfund investments. You have certain responsibilities while making an investment decision. These are designed to protect the benefits of members.
While borrowing through SMSF, investment must be made and maintained on a strict commercial basis. The purchase and sale price of fund assets reflect a true market for the asset and income from the assets held by your SMSF reflect a true market rate of return.
The Loan Structure
The SMSF loan structure of is described as below:
- Bare Trust
SMSFs can assist you to borrow with purchasing an investment in the residential property, but you must do this within the prescribed legal structure. The property must be held in a Bare Trust, as this structure ensure that whether the loan default the lender’s right that are limited to the property in the bare trust and not the other assets of the SMSF.
All the lenders require personal guarantees of the directors of the SMSF trustee or the individual As the lenders recourse against the superfund, which is limited to the asset that is held in the Bare Trust, they can personally pursue the guarantors for recovering any shortfall that might result from a default or loss on sale on the SMSF security property.
The maximum gearing is usually around 70% of the purchase price or the value of the property, whichever is less.
- Meeting The Interest Payment
The rental income from the Bare Trust security property along with the income generated by other assets in SMSF can be used to demonstrate serviceability of the loan.
Estimated Cost When Borrowing Through SMSF
- Establishment Fees
These are higher in comparison to home loans as the loan approval process is very complicated. Lenders on SMSF Property Investment Loan can require an establishment up to $ 1750, though most of the times these are waived if a lender have a special offer going.
- Valuation Fees
These cost around $500 for residential properties up to $750,000.
- Legal Fees
These vary depending on whether you already have Bare Trust in place. The cost of setting up a Bare Trust in usually around $2300. Additionally, you will have the legal costs for the loan documentation that again varies between the lenders, but likely be around $1500.
If you need an SMSF Property Investment Loan, then get in touch with GCC Home Loans to evaluate your options. For more details visit the website today!