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You are here: Home / Limited Recourse Borrowing Arrangements / Adding a property to your SMSF with an SMSF Loan

8 years ago, we saw the need in a growing market for lending experts who specialise in SMSF. Our team now combines years of experience through every aspect of self-managed super funds. Together, we organise more limited recourse borrowing arrangements (LRBA or SMSF loans) in a week than most other brokers or bank branches in a year. Here we share some of our insights as well as SMSF news with you.

Our expertise has been sought by and seen in Australian Broker, the Herald Sun, Money and Mamamia.

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Adding a Property

Adding a property to your SMSF with an SMSF Loan

November 23, 2016 By SMSF Loan Experts

Today we look at how your SMSF structure works once you’re ready to make an investment property purchase using a an SMSF Loan given to your fund. Generally speaking, your fund can borrow up to 80% of the value of a residential property. Super contributions and investment property rental income flow into your Self Managed Super Fund, while loan repayments are made from the fund. This means that the trustees are having the property paid off by their Super with having to make any repayments from their own back pocket.

Adding a property with SMSF Loan: Video

Structuring your SMSF to include a property

Okay so in our previous video we showed you the structure that would allow a Self Managed Super Fund to purchase a property using a loan. What I want to show you now is, briefly, how that will look once the property is in the picture. So we’ve got a $500k property, for the sake of the example, on the contract for the purchase of that property, the name that’s going to go on the contract is the name of the bare trust and the trustee of the bare trust. So that’s what’s going to go on the Title and on the Contract of Sale. On the loan application what the bank is interested in is actually the entity that’s going to be getting money – that’s the SMSF. So that’s your contract of sale, that’s your loan application. Very simply, but there’s a lot of confusion surrounding that. We go to the bank, and we show that this Self Managed Super Fund is getting income at the moment – and that income is the contributions that the employers of the members are paying into the Self Managed Super Fund.

Assuming we are working with a couple – two people who are working – what we’re going to have is two employers that are contributing into the Self Managed Super Fund. We’re now looking at having an investment property that is going to return a rent. That rent is also going to go into the SMSF’s account. Out of that account is going to come the loan repayments and the costs associated with holding the property. An SMSF can borrow up to 80% of the value of a residential property. So for the sake of the example, let’s assume that the trustees have decided to take out a $400,00 loan. The loan repayments are going to come from the account where the contributions and the rent from the property are being received. So what that means in a sense is that the trustees have that property being paid off in their super without having to make any payments from their personal back pocket.

SMSF Costs

We’re going to have other costs coming out of that account, namely the costs associated with holding the property. It could be council rates, water rates, body corporate, landlord insurance and the administration of the super fund. Every year, SMSFs need to complete a tax return, and that return needs to be audited. That has a cost and will be paid from the same account. That is very much what a Self Managed Super Fund with an existing property in the fund is looking like.

SMSF cost

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Filed Under: Limited Recourse Borrowing Arrangements, SMSF Loans

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