Yes, but only for the purpose of acquiring an investment asset and through a limited recourse borrowing arrangement (LRBA).
Your SMSF can buy real estate by borrowing money through what’s called a limited recourse borrowing arrangement or LRBA. The trustee then uses those funds to purchase a single asset (or collection of identical assets that have the same market value) to be held in a separate trust.
Any investment returns earned from the asset go to the SMSF trustee. Should the loan default, the lender’s rights are limited to the asset held in the separate trust, safeguarding the other assets held in the SMSF.
Unfortunately, many lenders now require a personal guarantee from the trustees. So while the assets and funds in the SMSF are protected, the lender can gain access to the trustees’ personal assets.
No. It wouldn’t be compliant with the ATO borrowing rules and there are no lenders offering progress payment options for SMSF loans.
Unfortunately not. The only way to access and use the equity in an existing property would be to sell it.
Under current legislation, lenders are required to hold more capital for SMSF loans than they do for standard residential loans. These loans are more costly to the lender, who in turn passes the costs on to the SMSF.
Some lenders require that not all of the liquid asset (cash or shares) in the SMSF be used to purchase a property and impose a minimum requirement. For example, they may require the SMSF can still show 10% of the property value in either shares or cash after the settlement of the property.
Delays often relate to the time it takes to legally assess the two trust deeds, but lenders continue to improve settlement timeframes.
Absolutely! We can even arrange for one of our lenders to give you an SMSF loan pre-approval before your SMSF has been setup.
SMSF loans are called LRBAs (Limited Recourse Borrowing Arrangements). LRBAs are No Recourse loans, which means the lender has no access to other assets owned by the SMSF in the event of a default. To get around this, banks require the trustee(s) to personally guarantee the LRBA.