Investing in property borrowing in your SMSF (SMSF gearing) to purchase a residential investment property may be a suitable and beneficial option for some investors, however, it is governed by a minefield of legislative requirements and making a wrong step can be costly.
Our Property Advisors can help identify whether SMSF gearing is right for you and then help you navigate this challenging area to enhance your ability to buy the right property in the right location and maximise your returns.
We will also help negotiate the best price for the property on your behalf so you can minimise the amount you need to borrow.
We’re experts in all aspects of residential and commercial property investment, including SMSF borrowing.
Some Facts about Borrowing in your SMSF to invest in Property
Level of risk:
– Borrowing inherently increases the risk of investment.
– There are risks associated with the complex nature of the structure which must be in place before signing the contract for sale. We can help you navigate this process.
– The limited recourse nature of the loan reduces risk to your personal assets. Should the SMSF default on the loan, the bank has no rights to members’ personal assets or other SMSF assets.
Some of the typical restrictions include:
– Property must be in a single title.
– Apartments must be no less than 50 square meters in size.
– You can’t redraw on the increased equity of the asset.
– The property must be for investment purposes only – you can’t use it personally or lease it to a related party.
Getting a Loan.
– Before granting loan approval, the financial institution will require a history of adequate contributions (two years) or that the compulsory superannuation guarantee (usually 9%) is sufficient to service the loan repayments.
– We can help you find a competitive product with a lender that understands borrowing within SMSFs as well as secured pre-approved finance.
Borrowing in your SMSF may be suitable if:
– Strong contributions into your SMSF or generated in income from other SMSF assets
– You wish to maximise the returns from your funds via the use of leverage.
– You’re comfortable with the risks associated with borrowing.