St George SMSF

We use St George for most of our SMSF Lending due to their offset feature.

As of today (most likely influenced by the APRA guidelines) St George will require customers to have at least 10% in liquid assets (shares, cash deposit, etc) after the purchase for the property. This now means that instead of requiring a minimum of 25% deposit - you will require 35%.

If the minimum requirement is not met within the SMSF, additional funds or assets held by the directors/members in an APRA regulated Superannuation Fund or demonstration of ability to make future super contributions can be considered.

Will post more changes re SMSF Lending as it comes to light but this is a very interesting one.
 
I don't mind this policy update by St George at all Shahin. For some time, SMSF Lenders have implemented a 'loose' criteria for minimum balance which can easily be influenced.

Personally - I recommend any SMSF should have a sufficient buffer after purchasing property, 10% is a minimum if not 15-20% or more to effectively diversify all of this should be considered in an effective investment strategy - all of which should be considered before you buy property and more importantly set up an SMSF. Even a settlement on Friday, one of the members was struggling with costs to complete and had to make a last minute contribution to meet settlement. This - unfortunately is a regular occurrence.

Over the last year we have seen tightening on LVR on off the plan (more to come), NAB pull out of the SMSF Market (brilliant), ANZ pull out (not that they were a player), leaving the St George as the leading SMSF lender.

I doubt SMSF loans are declining at all though, we use La Trobe (who have lowered LVR to max 75%), St George/ BOM (up to 80%), now with the budget announced there is more certainty that there will not be an immediate change as a result of the Murray Report, personally not for another 12-24 months. I would see a continued focus on limiting the LVR on off the plan to 50% - time will tell. One thing is for sure - the SMSF loan/ property market will continue to thrive ;)

Cheers, Ivan
 
I'm with Ivan. I wouldn't be encouraging anyone to use a SMSF loan without 20% excessive liquidity after settlement. And even then I'm assuming a CF neutral property.

Unfortunately far too many people think its acceptable to establish a SMSF and buy a neg geared IP using a SMSF which then consumes the member contributions in cashflows and fees / charges. (Audit, SMSF levies, ASIC fees, Bank charges, Tax and Accounting etc). Along comes a basic repair and whammy there is insufficient cash. You end up with a SMSF that consumes itself to remain afloat. That leaves a sole strategy of hoping that the property value increases which is a long term goal. In the worst cases the members have been forced to aggressively salary sacrifice to top up the fund or avoid cashburn.

The worst sorts of property are those sold by spruikers too. Through SS I have had a few approaches from people who cant sustain the cashflows but cant sell their IP as the value is far less than the cost, duty and all the add on costs. They seek a solution that isnt available. One common element is low SMSF balances, low incomes (meaning low contributions), inability to sal sac and what appears a total naivety in their understanding of what they have done.

My best recommendation for most people is to borrow sufficient for the property to be CF neutral. High income earners and wealthy may consider different strategies.
 
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