SMSF Lending - 80% LVR for RIPs?

Chan & naylor Accountants - Ken Raiss has a product that allows us to go to an 80% lend using the SMSF via a warrant.

Happy to discuss.

Hi Albertus,

What is the current variable rate on this product, which lender is it with, and are personal guarantees needed?

Thanks.
 
A friend has told me that the C&N 80% LVR is with PG's and 250k min. borrowings, but low 5's interest rates.
 
hi Albertus 6
question on the warrant
who owns the warrant
for me this is a bit of an issue
and can you answer a few questions
this is only with regard to private warrant not bank warrants and there is a bit of a difference
with your warrant the assett is held by the company and that supplies a warrant that get paid down
what happens to the asset if the warrant holder goes into recievership.
the assett is own by the warrant company so its now an assett of the receiver
if the super fund has paid down say 50% of the warrant but has no control or security of the assett where does that put the smsf
yes it can take legal or try to get soke security over the asset but from my view will have very little success.
and a liquidator will sell the assett to recover its costs.
what security does it give your smsf if they use your smsf product
(and please don't post we are big enough that this will not happen)
I have alot of people in smsf and this is a very interesting question
from a bank they are secure via a bank
but a private warrant is very different
I would be very interested in your answer since you have said
Chan & naylor Accountants - Ken Raiss has a product that allows us to go to an 80% lend using the SMSF via a warrant
I take it that us means you are involved
if I am reading wrong then it's not us
if it is us then please tell me the security for a smsf using your product.
for me this is a very interesting position in that a warrant is a basic intermedary position between the purchase price and full payment now this was taken up by a funder or a bank
the difference now (and the us comes to mind) is that you have private companies or entities supplying these products which to me is great
the trouble for me is that there is very little security for the super fund should the funder go west
please tell me I am wrong.
not the first time an accounting company thought it was a great idea I can list a few.
a trust idea does come to mind.
I am glad of this
Happy to discuss.
please post
 
Two issues brought to my attention recently re. SMSF and property:

1. When SMSF gets property from bare trust down the track... will there be stamp duty/CGT implications?

2. For on-lending to SMSF... can you do it at residential rates, or does it have to be at higher ''commercial'' rates?

Lots of grey, and too early to dive into this area for me.
 
hi jit
commercial rate re resi
well it is a commercial transaction
its a commercial business buying a resi product ( if it buying resi)
its the same a any commercial business buying a resi
people see a smsf as a resi purchase
well it is but its by a commercial entity so it comm its that simple.
as for rate they change but the rates not the main thing here.
this is any way money
its money you have to spend or invest anyway.
you have not alot of control on how much the min is you can add put there is a min amount and either you invest it smsf or some one else invests it normal super its still invested.
the aim is to hold or leverage until you are retired which then has no cgt
you can leverage off it but thats a different post.

if you can invest anyway money and can leverage off it
thats not the best profit but close to it.

and the thing with anyway money is very simple you have to invest or put it come where like it or not
 
1. When SMSF gets property from bare trust down the track... will there be stamp duty/CGT implications?

Not if you have kept your paper trail showing that the SMSF (the beneficial and ultimate owner of the property under the trust) provided the funds used to buy the property. In other words, any deposit came from the fund's bank AC and the borrowings are in the SMSF's name. In that case, although the purchase is in another name (the custodian or warrant provider) iot is clear the property was alway meant to be for the fund.

In NSW you can prove this at the beginning when buying the property (resulting trust) or at the end, when you transfer the property to the fund (discretionary trust evidencing terms of a resulting trust).

Disclaimer: not a lawyer (just playing one on the intarwebs), not personal advice, do your own due diligence etc etc.
 
Not if you have kept your paper trail showing that the SMSF (the beneficial and ultimate owner of the property under the trust) provided the funds used to buy the property. In other words, any deposit came from the fund's bank AC and the borrowings are in the SMSF's name. In that case, although the purchase is in another name (the custodian or warrant provider) iot is clear the property was alway meant to be for the fund.

In NSW you can prove this at the beginning when buying the property (resulting trust) or at the end, when you transfer the property to the fund (discretionary trust evidencing terms of a resulting trust).

Disclaimer: not a lawyer (just playing one on the intarwebs), not personal advice, do your own due diligence etc etc.

Apparently it is not that straight forward. Pls, read my post:
http://www.somersoft.com/forums/showthread.php?t=56618
 
Two issues brought to my attention recently re. SMSF and property:

1. When SMSF gets property from bare trust down the track... will there be stamp duty/CGT implications?.

Hi JIT

As deejay says you shouldn't have any SD/CGT implications if your records are correctly drawn up and properly kept.

In NSW you need to have your bare trust documents stamped with the Office State Revenue and in doing so you need to provide evidence such as bank statements showing deposit paid by the SMSF as well as your loan agreement showing the balance of funds borrowed etc. This further proves who the real owner is at the time the transaction takes place and as such should provide further evidience that the SMSF "owns" the property and has paid for it.

2. For on-lending to SMSF... can you do it at residential rates, or does it have to be at higher ''commercial'' rates?

Whilst banks charge a higher rate for commercial security and generally provide lower LVR's there is no restriction for related parties to be more flexible about LVR's and this perhaps may then transalate into how a "commercial' rate has been calculated.

For example, if your loan to the SMSF equates to an LVR of say 50% (irrespective of whether the property is resi or commercial) then perhaps a lower rate could be justified and still considered to be commercial by the ATO because who better than yourselves to judge & understands the risks of such a low LVR.

Conversely if the LVR is high eg 100% then perhaps your loan rate to the SMSF needs to be much higher to account for the higher risk.

Unfortunately the ATO has to date not given any real clear guidance on what a commercial rate is and so debate on this subject will continue until they do.
 
hi mike
mezz rates seem to be the market number.
as it is a mezz funding on the back of the first funder
mezz rates for construction funding and mezz rates for this type of funding to me are the same and I think most funders look at it the same.
mezz rate change but between 15 to 20% you can get lower but thats a negotiation.
this is 100% funding.
 
hi Albertus 6
question on the warrant
who owns the warrant
for me this is a bit of an issue
and can you answer a few questions
this is only with regard to private warrant not bank warrants and there is a bit of a difference
with your warrant the assett is held by the company and that supplies a warrant that get paid down
what happens to the asset if the warrant holder goes into recievership.
the assett is own by the warrant company so its now an assett of the receiver
if the super fund has paid down say 50% of the warrant but has no control or security of the assett where does that put the smsf

Good question.

Albert, how are you funding these warrants?

Through banks, and/or is it our own private funding??
 
Reply to Grossreal

In answer to your questions -

who owns the warrant - The warrant is owned by the SMSF - :)

with your warrant the assett is held by the company and that supplies a warrant that get paid down - NO. The asset is held under Warrant by the trustee of the trust:) until the debt is cleared and the property passes to the SMSF

what happens to the asset if the warrant holder goes into recievership. I am not sure how this could happen the lending is based on the rental income + 9% super contributions - maybe if the property was untenanted for an extended period? - But part of your strategy should be to have some landlord insurance in place - this is where your Finacial Planner would come into it..

the assett is own by the warrant company so its now an assett of the receiver if the super fund has paid down say 50% of the warrant but has no control or security of the assett where does that put the smsf - Again not sure how you could let this happen :confused: the warrant is an asset of the SMSF if the warrant collapsed (as per the example you are suggesting) - then the proceeds of the sale would go to the SMSF first as the rightfull owner.
 
Minimum loan size the lenders apply is $250,000 - loans are through 3 lenders - rates between 5.39 - 5.59% as at 28/10/09.
The issue with a smaller loan will be the set up costs - it's just not economical, you will burn up more money setting up the warrant than the extra funds you will be able to borrow on anything smaller than about $600,000.
 
Minimum loan size the lenders apply is $250,000

Not true for NAB. I'm getting a loan through them for my SMSF and I only have about $100k in super, looking to borrow 70% and purchase a $250k - $290k property.

How much is C&N charging the SMSF for the warrant?
 
Sorry, to clarify - $100K in super is fine but at 70% that only equates to a loan of $200K and a purchase price of $285Kish. STG & NAB and CBA will all accomodate at 70%.

If you want 80% the extra cost (12K approx) would need to be worth it. At 80% the $100K super gets a property of $350K. The rates are 0.7% less than the rates from NAB STG CBA normally for super.

You just need to decide if it's worth it and I normally think that a purchase price somewhere around the $600K mark is about that point.
 
hi Albertus 6
can you tell me where does the assett sit if the company that is holding the warrant goes into receivership
I understand that the income covers the costs and if there is no income that there would be an issue
but for me what happens if the run cost of the fund out strip the income and its holding 300 properties in this fund and it goes into receivership
now you can say this will not happen
but cp cp1 and do I need to mention a few others that are in trouble because the cost of the fund against income caused a problem.
now this may or maynot be the case
the question for me is where does the assett it
and what security does ths smsf have.
I understand these very well just getting my head around this position.
maybe jit can give a simpler way of saying it
I am not asking about the smsf but the fund closing down.
 
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