SMSF Finance structure

[joejunemac]

Hi All

I need help, am in the process of structuring smsf trust but am having big problems getting idiots at several banks understanding that the company who is trustee for super fund wants to borrow funds for IP. Property we will be looking at is around $300,000, super fund will be contributing $100,000 and bank needs to loan the other $200,000 to the company who is the Trustee for the Super fund. They dont seem to understand the scenario and are also saying things like " the Company would need to prove income for 2 Yrs", this is a new company set up solely for the super fund, me and my partner are still employed by other people therefore have super contributions which legally have to be paid into this super as well as rent of course which will more than service this loan, what is it that they don't get, am I not explaining things properly?

 

[373au]

Most banks wont do residential property loans into a SMSF, I am doing mine with NAB they have by far the best nterest rates & have a product specifically for this scenario.

Get in contact with Vatsal Trivedi he is based in the Melbourne NAB office, I have never met him but have done everything phone/email/fax. He is the only person I have spoken too the fully understand the SMSF structure.

regards
Spud

 

[MikeF]

SMSF Loans

As Spuds says NAB have the best SMSF loan offering however do require personal guarantees from all the funds members. Go see a good MB nd they will be able to arrange althought give yourself plenty of time as approval is anywhere up to 4 weeks or more.

In assessing the loan they will only look to the rental income of the property to be purchase togther with the historical contributions of the members.

St George also do these type of loans with guarantees not required however their interest rate is much higher.

 

[Jamie_D]

I agree that NAB are the best and lend around 60%

Westpac will also do it however not the best structure

I have arranged a few over the last 6 mnths....great investment strategy depending on your age etc. especially now...avoid the share market and buy property!

What type of property are you keen on and where in Oz?

 

[joejunemac]

smsf finance

Thanks for your comments, I will definately be trying NAB next and contacting the person Spud mentioned.

In answer to the Jamie D I am purchasing in WA (Seville Grove) area already have property there.

Just another question, with the personal guarantee from the Directors, does this comply with ATO rulings on smsf?

 

[joejunemac]

smsf finance

Sorry more questions, about the contributions into the fund, as I said this is a new fund so will this stop them loaning the money, I can give them statements from the old fund and can prove we are still working so they know that contributions have to go in there as well as rent, what have they got to lose?

Any information appreciated.

 

[StuartW]

I think St George has the best product with no personal guarantees. St George has two product offerings – one through residential lending which is a rip off (rate too high) and one through business banking with a much more competitive rate (for resi and commercial) – only a touch higher than NAB. The ATO has issues with providing personal guarantees so beware – refer to their recent Taxpayers Alert.

If you are going to set this structure up, you must get a knowledgeable & experienced mortgage broker, financial planner or accountant to “project manage” this transaction as too many things can go wrong. It is very complex and a lot of lawyers and banks are making errors. The legal docs need to be perfect to avoid CGT and stamp duty issues later on and these differ State by State. Doing this transaction yourself (if you haven’t done one before) is fraught with problems in my opinion

 

[StuartW]

Here is the Alert FYI - http://law.ato.gov.au/atolaw/view.htm?DocID=TPA/TA20085/NAT/ATO/00001

It is pretty clear in saying that personal guarantees "may result in recourse being made" so that the loan is not "of a limited-recourse nature".

 

[Buzz]

Joe, my understanding is that St George has the only complying product on the market, although all majors offer SMSF loans. As SW indicates get an experienced broker/banker and financial advisory crew onboard for the transaction, as you need to get it right up front.

The trouble is finding a broker with experience.

The reality is the products are new, the legislation is new and there are very few with the knowledge and experience because of these simple facts. However I am sure if you speak to your broker they will do the research to come up to speed and offer a true comparison of the products.

Hope this helps
Jane

 

[Trying2Learn]

We are fairly new to this but are going through the same process at the moment.

When we looked at getting a loan ourselves for the SMSF(before we found a good MB) different banks have different ideas on who the trustees should be of the SMSF.

NAB wanted individuals to be trustees, Westpac wanted a company as smsf trustee, and StGeorge had a min lend of 250,000. Westpac & NAB need 30% deposit and SG needed 28%.

I am sure someone with more knowledge will correct me if I am wrong, as I said I am still learning.

 

[joejunemac]

Is it worth it?

Hi All, thanks for your comments. I am having second thoughts now, the set up costs are very high, the interest rate is very high and cant be re-financed or fixed after you enter into it, there is no negative gearing benefits, I know cap gains wise it can be great, but who knows how long that will take. What about depreciation, can this be claimed yearly in this kind of structure, what benefit do any of you see, is it worth it?

Regards

June

 

[MJD]

If you are going to set this structure up, you must get a knowledgeable & experienced mortgage broker, financial planner or accountant to “project manage” this transaction as too many things can go wrong. It is very complex and a lot of lawyers and banks are making errors. The legal docs need to be perfect to avoid CGT and stamp duty issues later on and these differ State by State. Doing this transaction yourself (if you haven’t done one before) is fraught with problems in my opinion[/QUOTE]

I just settled IP using SMSF through NAB. I've done this transaction by myself , I am now a bit worried after reading your comment regarding CGTand stamp duty later on, etc... I just think we paid total around $3600 to NaB for their fee to review the trust etc to make sure everything is complied before they released fund. Can you please tell me what are the issues I need to look at eventhough the property has been settled. thanks heap
MJ