SMSF: co-own a house with a friend

J

Jas2u

Recently, I came to know that I can pool my SMSF with a friend to buy a property. I have around 60k in super & my friend don't own any house atm. I understand that I can't use this house as a security & can't live in it but:
- Can we buy a house as 50:50 co-ownership between SMSF:FHB?
- Is it possible that the same friend can live in this house & pay half rent to my fund. This way we both can afford to buy a property in an area we otherwise cannot?
Also, what pros & cons you see out of your knowledge & experience?
http://greenfrogsuper.com.au/buying-property-with-your-smsf-co-ownership/
 
Yes 2 or more SMSFs can buy property together as tenants in common.

No, no member of any of these funds can live in the property.

You may want to consider a unit trust owning and the SMSF each owning separate units of the trust.

Get a third fund and the trust could borrow to buy property if set up right.
 
Thanks Terry.
I mean to say that 50% will be my smsf BUT 50% will be first home buyer deposit (not super fund). Can this FHB live in the house?
 
Jas2u said:
Thanks Terry.
I mean to say that 50% will be my smsf BUT 50% will be first home buyer deposit (not super fund). Can this FHB live in the house?
Click to expand...

I think they could if they are not related to you and pay the SMSF rent for use of its share of the property.

But, would this be a good idea?
 
Terry_w said:
I think they could if they are not related to you and pay the SMSF rent for use of its share of the property.

But, would this be a good idea?
Click to expand...

How would the banks feel about it? The effect on any proposed leverage (if the other half wasn't owned by smsf) could impact on decisions? If I was a bank and I was looking at the deal I would be a bit nervous as smsf product going into a deal with a fhb. They are different risks. One for the brokers perhaps.
 
This is not a typical thing that an SMSF would do. Is it consistent with your investment strategy in the SMSF? What would happen if your friend doesn't pay rent? You can't evict old mate because he owns half the house. What is your SMSF auditor going to do?

What is your friend going to use as security? Most banks wouldn't accept security over half a house as you can't mortgage your half to secure old mate's debt.
 
Even IF you got a bank to lend on this, it would be wrought with danger.

DON'T DO IT!

Investments with friends involved just don't mix & you risk losing your friend.
 
Thanks guys.
Plan is to buy a house with land & owner-build a granny on back later for more return. That way we both keep half house. He lives in one half & i rent the other half. We both can fund granny outside "limited recourse borrowing arrangement" from savings.
@knightm & Terry- this plan is safer than toxic 95% or interest only loans & derivatives frauds. Both will be paying at-least 20% deposit each.
@skater-"Investments with friends involved just don't mix & you risk losing your friend".- well said mate. Generally Yes.
@jrc- This friend is like half part of me. We had similar successes on several joint decisions in the past. Our trust is rare in friendships. Otherwise would not have bothered. Can you please expand on SMSF audit? How deeply ATO pokes its nose in it?
Overall any more ideas on this plan???
 
FYI local Bankwest manager is ready to fund the case. He said no problem provided all the arrangements are legal. They seem to be 'loan hungry' to get back the interest from our blood & sweat currency in return for few computer digits. LOL.
 
You want to owner build a SMSF owned house? Probably not possible under the state building regulations. In NSW for example it is only possible to build a house you are going to live in. Are you a licenced builder? You will be building for a third party - the SMSF.

Then there are the SIS Act laws to consider. Is the SMSF going to fund it?
 
Hate these so called REGULATIONS.
"limited recourse borrowing arrangement" is one time on first purchase. We both are going to fund the granny half-half from personal savings. Isn't that a granny is council level project? Shouldn't be a problem when its going to increase the rental return.
 
Jas2u said:
Hate these so called REGULATIONS.
"limited recourse borrowing arrangement" is one time on first purchase. We both are going to fund the granny half-half from personal savings. Isn't that a granny is council level project? Shouldn't be a problem when its going to increase the rental return.
Click to expand...

You won't own the property though.
 
Jas2u said:
http://law.ato.gov.au/atolaw/view.htm?Docid=SFR/SMSFR20121/NAT/ATO/00001
Table 2: whether it is a different asset
A 'granny flat' is to be constructed in the backyard of a property which already has a four bedroom residence established on it.
The character of the asset would remain residential premises and thus the construction of the granny flat would not result in there being a different asset.
Click to expand...

I am not saying one cannot be built. But
Who is going to pay for the granny flat?
Who will build it?
 
What Terry is alluding to is that you may be required to enter into a contract with a licensed builder to construct the gf as you or your partner are not able to contract with another party (ie smsf) to construct the gf as it breaches the home building act. Laws in NSW are also changing so owner builders will not be able to procure home warranty insurance which would be required for this work.
 
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