Self-Managed Super Funds (SMSF)
Self-Managed Super Funds (SMSF): What They Are and How to Invest in Property
Use your Self-Managed Super Fund to get a home loan and grow your investment portfolio for retirement.
If you're looking for a way to save for retirement, a Self-Managed Super Fund (SMSF) may be an option worth considering. Unlike other types of super funds, the members of an SMSF are usually also the trustees, which gives them greater control over investment decisions.
One of the investment options available to SMSF members is property investment. As long as it aligns with the fund's investment strategy and risk profile, members can use funds from their SMSF to buy an investment property.
If you have an existing SMSF home loan with a major bank, there is a high chance you're paying too much as the major banks have withdrawn from this market. Now is a great time to take advantage of some great SMSF home loan refinance options available elsewhere.
Greg Muoio is a qualified home loan specialist who can help. Accredited with multiple leading lenders in the SMSF segment, Greg can assist with expanding your SMSF investment portfolio or refinancing your SMSF loan into something more competitive.
To schedule an appointment with Greg, call 0403 387 309 or book an appointment below.
How do SMSF's work?
Your SMSF works in much the same way as any other super fund. During your working life, contributions are made to the fund and invested to create wealth which is distributed during retirement.
Can you do this with a new SMSF?
Yes! When a new SMSF is set up by your accountant or financial planner, you can apply for a SMSF loan by showing historical contributions to your old fund(s) along with confirmation from your accountant or financial planner that your fund is being rolled over to the new SMSF.
What type of property can my SMSF purchase?
Investing in residential or commercial properties through a Self-Managed Super Fund (SMSF) is possible, subject to certain conditions:
- The property must be purchased as an investment and rented out to a third party at arm's length.
- Is not a development - i.e. something that requires construction or is vacant land is not acceptable.
- The property meets the ‘sole purpose test’ provided by the ATO (i.e., only providing a benefit to the members upon retirement).
- The property should not be sold by a fund member or lived in by them or any related person. However, commercial properties purchased by the fund can be leased to a fund member for business purposes, following specific rules and at the market rate.
- Only one title per contract is allowed when purchasing a property through an SMSF. For instance, a duplex across two titles sold in one transaction would have to be changed to two separate transactions and loans.
If you are interested in expanding your SMSF investment portfolio, Greg Muoio, is a qualified home loan specialist in Self-Managed Super Fund loans and can help. He is accredited with multiple leading lenders in the SMSF segment and can assist you in refinancing your SMSF loan into something more competitive. You can schedule an appointment with Greg by calling 0403 387 309 or booking an appointment below.
How is a SMSF home loan structure different to a "regular" investment loan?
Using a self-managed super fund (SMSF) to buy a property requires a different home loan structure and process. All SMSF home loans are taken out using a limited recourse borrowing arrangement (LRBA), involving a separate property trust and trustee outside of the SMSF structure. The lender only has the property held in the separate trust as security, so the SMSF must meet all loan repayments. Lenders will use the expected rent, investment income, and historical superannuation payments to determine affordability.
All the income and expenses of the property go through the SMSF’s bank account, and the fund must meet all loan repayments as they are due. If the SMSF fails to do this due to insufficient funds, the lender only has the property held in the separate (bare) trust as security, and therefore cannot access any remaining assets of the super fund.
Because of this, lenders will expect the fund to have a certain level of cash after the purchase as a buffer, and will generally use the expected rent + other investment income (e.g., interest on the amount of remaining cash) + historical superannuation payments made for their affordability calculations. If there is a shortfall to be made up with voluntary contributions from a member, this will often need to be evidenced by historical voluntary contributions over the past year (or 2 years for self-employed members).
Unlike regular investment loans, your personal income, assets, liabilities, living expenses and age are not necessarily taken into consideration but are required to show your profile as a guarantor on the loan. However, your credit history is considered, and while previous adverse credit will not mean an automatic decline, it may increase the interest rate and/or lower the LVR available to the SMSF.
Refinancing SMSF home loans
All the major banks have withdrawn from this market leaving many people on "grandfathered" SMSF home loan products. When a product is "grandfathered", rates become uncompetitive very quickly as lenders try to get people "off their books".
However, help is at hand! Mortgage Choice Charmhaven has multiple lenders available ready and willing to refinance SMSF home loans that are on high rates with other lenders. The process can be very quick by using evidence already available in the SMSF's history to confirm the loan is affordable.
Get SMSF home loan advice from an expert!
SMSF Home Loans can be complicated and many mortgage brokers are not familiar with them. Always use a broker with experience and knowledge in SMSF home loans like Greg Muoio at Mortgage Choice Charmhaven.
Greg has many years' experience in SMSF Home Loans and is fully accredited with multiple lenders offering these products and has also completed all SMSF lending compliance and certification training from external registered training organisations.
Contact Greg Muoio - your local SMSF Home Loan expert on 0403 387 309 for a chat, or use the "Book an appointment" button below.
