Expert reveals how purchasing a property with your super can actually boost your retirement funds
- Written by Tess Sanders Lazarus
According to Yannick Ieko, the founder of SMSF Loan Experts, using your super to buy property gives you access to some of the best tax incentives for investing in property. But it’s essential to get the right structure to meet the ATO’s strict borrowing rules and to allow your investment the scope to flourish.
“With a correctly optimised loan, self managed super fund structure and property type, your fund could be hundreds of thousands of dollars larger when you retire,” Ieko said.
“Most common self managed super fund loans are stiff and restrictive – meaning you’re generally bound to a higher interest rate, with limits around the types of property you can borrow within your super fund.
“Property lawyers, banks, accountants, and financial advisers are all great at what they do, but the complex nature of self managed super fund, or SMSF, lending and its regulations means that these professionals are rarely able to fully understand all that’s involved with SMSF lending. As a result, it’s not uncommon for many self managed super funds to end up with lost deposits, non-compliant structures or loans that limit the outcome of their investment.”
According to Ieko, these errors could mean the SMSF trustee misses out on a larger nest egg when they retire. At SMSF Loan Experts they use their expertise to help facilitate the entire process to avoid unnecessary issues arising. They strive to make investing simple, with great rates.
“We help the trustees of self managed super funds optimise their loan and lending structure to get the best possible outcome, using the best lending products, smart strategies, and carefully tailored service,” Ieko added.
“Imagine if that hobby farm you have always dreamed of didn’t have to be a dream anymore. You could borrow at a competitive interest rate and purchase a high-growth, high yield property all inside your super. It is possible.”
As the Managing Director of SMSF Loan Experts, Yannick specialises in helping investors achieve success by providing tailored finance solutions to SMSFs looking to borrow to invest in property. He has answered the most commonly asked questions he receives from clients.
Can an SMSF borrow money?
“Absolutely, but only for the purpose of acquiring an investment asset and through a limited recourse borrowing arrangement, or LRBA,” Ieko explained.
According to Ieko, your SMSF can buy real estate by borrowing money through a LRBA. The trustee then uses those funds to purchase a single asset, or collection of identical assets that have the same market value, to be held in a separate trust. Any investment returns earned from the asset go to the SMSF trustee.
Can SMSF borrow to build?
“Unfortunately, no. It wouldn’t be compliant with the ATO borrowing rules and there are no lenders offering progress payment options for SMSF loans,” Ieko explained.
Can a SMSF use equity in a property already owned as a deposit to purchase the next property?
“Once again, unfortunately not. The only way to access and use the equity in an existing property would be to sell it,” Ieko said.
Why are SMSF loans more expensive?
According to Ieko, under current legislation, lenders are required to hold more capital for SMSF loans than they do for standard residential loans. These loans are more costly to the lender, who in turn passes the costs on to the SMSF.
How much can my SMSF borrow and what are the liquidity requirements?
“With an SMSF you can borrow 80 percent for residential and commercial loans,” Ieko added.
“In terms of liquidity, some lenders require that not all of the liquid asset, cash or shares, in the SMSF be used to purchase a property and impose a minimum requirement. For example, they may require the SMSF can still show 10 percent of the property value in either shares or cash after the settlement of the property.”
Can an SMSF get a pre-approval?
“Absolutely! We can even arrange for one of our lenders to give you an SMSF loan pre-approval before your SMSF has been setup,” Ieko continued.
Can you assist with standard lending?
According to Ieko, SMSF Loan Experts specialise in SMSF loans. Since they began 12 years ago, they have filled the growing market demand for lending experts who specialise in SMSF. Today, their team now combines years of experience through every aspect of self-managed super funds. They pride themselves on organising more limited recourse borrowing arrangements in a week than most other brokers or bank branches in a year. SMSF also offer their expertise on the range of traditional lending options for their clients.
