The lending is only one part of the structure.
Buying property through a self-managed super fund can involve more than finding a lender willing to approve the loan.
The fund structure. The borrowing structure. The property. The lender. And the order in which decisions are made.
They all matter.
At Evermore, we help clients understand the lending considerations involved in financing eligible property through an SMSF and work collaboratively with their professional advisers where appropriate.
Because with SMSF property finance, getting the structure right before you buy can be far easier than trying to fix it afterwards.
Where an SMSF borrows to acquire property, the lending is generally established under a limited recourse borrowing arrangement, commonly referred to as an LRBA.
The property is generally held under a separate holding arrangement while the loan remains in place.
This means the names on the contract, trustee structure, holding trustee and timing of the arrangement can be important.
Before a contract is signed, it is important to understand how the SMSF, trustee and any required holding structure are intended to work.
We'll review the proposed borrowing structure from a lending perspective and, where appropriate, collaborate with your accountant, financial adviser and solicitor.
Not every property is suitable for every SMSF lending strategy or every lender.
The property type, use, location and transaction may influence lender appetite.
For commercial property, the lease and tenant may also form part of the lender's assessment.
Lenders may consider the SMSF's existing balance, contributions, rental income, liquidity and ongoing commitments when assessing the proposed loan.
The lender's servicing methodology can vary.
The purchase contribution is only part of the picture.
Stamp duty, legal costs, lender fees, valuation costs and the fund's ongoing liquidity position may also need to be considered.
SMSF property transactions involve multiple moving parts.
The finance, legal structure and professional advice should not operate in isolation.
This is one of those areas where the order of decisions matters.
A limited recourse borrowing arrangement is a specialised borrowing structure that may allow an SMSF to borrow to acquire an eligible asset, subject to superannuation law and the fund's circumstances.
The lender's recourse is generally limited to the asset held within the arrangement, subject to the loan and guarantee documentation.
An SMSF may be able to acquire eligible residential investment property, subject to the relevant superannuation rules and lender requirements.
The property is generally held for investment purposes and restrictions apply to the use of residential property by fund members and related parties.
Commercial property can form part of an SMSF property strategy in appropriate circumstances.
Lenders may consider the property, lease, tenant, rental income and the broader SMSF financial position.
Related party transactions and business real property rules can be complex and should be discussed with appropriately qualified advisers.
Borrowing capacity can depend on the lender, property, proposed loan-to-value ratio, SMSF contributions, rental income, existing fund commitments and liquidity position.
Different lenders may assess the same SMSF differently.
SMSF lenders can differ in their accepted structures, property appetite, servicing methodology, loan terms and documentation requirements.
The lowest advertised rate is not the only consideration.
We assess the proposed transaction, understand the structure and explain the lending options available based on the circumstances presented.
Because the loan needs to fit the structure, not the other way around.
SMSF property finance sits alongside financial advice, tax advice, legal advice and superannuation obligations.
Our role is lending.
Where appropriate, we're happy to collaborate with your accountant, solicitor or licensed financial adviser so the finance can be considered alongside the broader strategy.
The right conversations, with the right people, at the right time.
