buying joint in smsf-affect future finance ?

[eyespy]

hi,

i currently own a property joint and have foudn it has affected my ability to get future loans as some lenders want to calculate half rent and full liability.

am thinking of buying another property joint in smsf- will this have the same impact or will they see the smsf as a separate entity ?

also with land tax and smsf- wil they take into consideration my land tax threshold as is or will i be seen as a seaprate new entity in smsf

 

[Property Hoarde]

It will have no effect on the joint property as the joint property will not have a loan on it. Unless you want to breach reg 13.14 of the SIS act ie not giving a charge over an asset of the fund.

You would need to fund your side of the deal from another property and I would assume the lender therefore does not need to know about the SMSF.

 

[eyespy]

i'm not quite sure you understand my question. i want to buy property in smsf joint (myself and my dad)....but will this affect my ability to get future loans ?

 

[Aaron_C]

What Property Hoarde is saying is that SMSF loans are non-recourse - so they have no impact on other liabilities.

 

[Terry_w]

i'm not quite sure you understand my question. i want to buy property in smsf joint (myself and my dad)....but will this affect my ability to get future loans ?

Do you mean:

1. You and your dad and the trustee of your SMSF (which may be you and your dad) want to buy a property as tenants in common, or

2. You and your dad have a SMSF and the trustees of the fund want to buy the property?

 

[Property Hoarde]

I was thinking you were going to purchase a property jointly with your SMSF ie 50% SMSF 50% you. In this situation you can not use the property to secure a loan for your 50% and therefore this property will not effect future borrowing.

But are you talking about the SMSF doing a bare trust arrangement?

 

[eyespy]

terry- i mean # 2. the smsf will buy the property 100% (and my dad and myself have a smsf)- so this should have no effect on my future borrowings ?

 

[Weasil007]

i'm not quite sure you understand my question. i want to buy property in smsf joint (myself and my dad)....but will this affect my ability to get future loans ?

Any finance via the SMSF will require a personal guarantee...this may affect you?

 

[Terry_w]

If you give a personal guarantee it will affect future borrowings.

 

[Property Hoarde]

If you give a personal guarantee it will affect future borrowings.

But the guarantees should only relate back to the property (ie you will provide access to the property if required ec...) and not financially
as these loans are non recourse.

 

[Terry_w]

But the guarantees should only relate back to the property (ie you will provide access to the property if required ec...) and not financially
as these loans are non recourse.

Good point. But are they non recourse to the guarantors? If so why would a guarantee be needed. I would need to read a guarantee to check.

 

[Weasil007]

Good point. But are they non recourse to the guarantors? If so why would a guarantee be needed. I would need to read a guarantee to check.

Going through this now in my own SMSF. They required personal financial guarantees against the loan. They like to cover themselves and in this field (SMSF) your not really in a position to argue or negotiate.

 

[Terry_w]

I believe there is only one SMSF lender out there that doesn't ask for personal guarantees - if the rent and the income from the fund can cover the loan.

 

[Weasil007]

I believe there is only one SMSF lender out there that doesn't ask for personal guarantees - if the rent and the income from the fund can cover the loan.

We stuck with NAB. Most banks, while they say they can do SMSF have no idea or maybe run it out of one branch interstate. Some think it too hard. In time this area of finance is set to boom with folk dissatisfied with their managed super funds poor performance in recent years...

 

[Terry_w]

We stuck with NAB. Most banks, while they say they can do SMSF have no idea or maybe run it out of one branch interstate. Some think it too hard. In time this area of finance is set to boom with folk dissatisfied with their managed super funds poor performance in recent years...

Weasil, what does your guarantee say? Are you personally liable for the debt if the funds doesn't pay the loan?

 

[Weasil007]

Weasil, what does your guarantee say? Are you personally liable for the debt if the funds doesn't pay the loan?

Dont have access to this documentation at the moment but via NAB:

Business Lending - Purchase of Commercial or Rural Property:


Type of loan’s currently available;
• Market Rate Facility
• Business Markets, and
• NAB Business Options Interest Only Loan -Interest in Arrears.
• NAB Business Options Interest Only Loan -Interest in Advance.
• NAB Business Options Combination Loan.
• NAB Business Options Instalment Loan.

Choice between interest only and Principle and Interest.

Interest rate, application fee and applicable ongoing fees available upon application.

Normal lending term up to 15 years. May be longer on exception basis.

Borrow up to 65% of commercial property value. Minimum loan value $50,000 with no maximum amount.

Loan Security includes; tripartite deed, first mortgage over the asset plus guarantees from SMSF members/directors given strictly in their personal capacity.

 

[Weasil007]

Dont have access to this documentation at the moment but via NAB:

Also via NAB:

Note: NAB strongly recommends that you seek the appropriate financial, tax and legal advice prior to implementing this strategy
How does it work?
Your SMSF wants to buy a commercial property but cannot fund the full purchase price. It does, however, have enough funds for a percentage of the purchase price. The SMSF can purchase the property under an instalment arrangement subject to certain criteria. The SMSF provides the funds for a partial payment of the property, pays all relevant fees and borrows the remaining funds to pay the balance.
The property is owned by a separate Security Trust with your SMSF having a beneficial entitlement to it. The Security Trust may then lease the commercial premises on commercial terms. The Security Trust receives lease payments from the lessee and additional instalments from your SMSF. These are used to pay expenses and loan repayments relating to the premises.
The property will be the sole security for the loan under a limited recourse loan. In the event of default, the lender only has recourse to the property, and any security provided by a guarantor, and cannot claim on any other assets within the SMSF.
After the loan is repaid, the SMSF then has the right, but not the obligation, to acquire legal ownership of the business premises

 

[Terry_w]

Yes, that is what I think. Personal guarantors will be personally liable, their personal assets will be at risk but the SMSF are not used to secure the property purchased at all and are not at risk. The actual property securing the loan is held in a separate trust to enable this to happen.

Therefore giving a personal guarantee for a SMSF loan would affect future borrow capability for the individual in their personal capacity - same with the guarantee of a property loan with a discretionary trust structure for example.