Self Managed Super Fund Loans
Super-leveraged property investment has arrived in Australia!
- If you have a SMSF you are now able to use these arrangements to help you buy a residential or commercial investment property through your fund.
- Superannuation funds can now borrow money to purchase real estate.
- In Sept 2007 The Superannuation Industry Supervision Act (SIS ACT) was amended to allow super funds to borrow so long as a special structure is utilised.
- Changes to super legislation now allow Self Managed Super Funds (SMSFs) to borrow for direct investments in real estate! Until recently, this has not been possible.
- This exciting new development means that Investors can now have as much choice and control over investment properties inside as outside super!
To obtain more information on how these new changes can benefit you, Click Here to visit our new Self Managed Super DVD Information page.
How Does it Work?
Your SMSF wants to buy property (residential or commercial real estate) but does not have enough funds for the full purchase. The SMSF can now make an equity contribution on the property and borrow the remainder of the funds to complete the purchase. The following diagram illustrates how your SMSF can purchase property.
Case Study
Suppose your SMSF has $150,000 in the cash account. As the SMSF trustee, you want to buy an investment property worth $350,000. A trustee buys the property on behalf of your SMSF under an instalment arrangement. The $150,000 is used to make an initial payment for the property. The shortfall of $200,000 plus $25,000 in stamp duty and acquisition costs is funded by a limited recourse loan, using the property as security.
The trustee arranges for the property to be leased to an unrelated party and the rent, together with other SMSF income and/or member contributions are used to make instalment payments. Once the loan is paid off, the legal ownership of the property can be transferred to the SMSF.
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