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Purchasing Property with a SMSF - TIC

Discussion in 'Superannuation, SMSF & Personal Insurance' started by pestgirl, 28th Apr, 2009.

  1. pestgirl

    pestgirl SMSF novice

    Joined:
    28th Apr, 2009
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    Location:
    Windsor nsw
    I would be interested in feedback of our plan with our SMSF and if anyone has done this yet.
    We currently have a SMSF with the $$ in a unit trust (managed) - so we are paying fees - then also having to pay to audit the fund :mad:
    I have looked into the bare trust scenario to purchase property- but it is still very complicated and access to funds not a clear cut process.:confused:
    What we are endeavouring to do is set up a "tenants in Common" arrangement. We have already an agreed amount that we can borrow from our bank and after 30th June (when the property market settles) we are looking to purchase - probably a home unit.
    It will be divided so that the (say 40%) the SMSF has invested - then these %ages will be across all incomes derived and expenses.
    It seems fairly logical - but I am sure that there will be minefields associated with this and would value any info on this topic.
     
  2. Superman

    Superman Well-Known Member

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    Location:
    Gold Coast, QLD
    Tenants in common is possible - but the title of the property can't be used as security.

    Only way to have the title of the property used as security is via a debt trust.

    Debt trusts are new and fancy so cost more - but the cost is coming down all the time. The lack of knowledge with your typical conveyancing solicitor and lender solicitor also adds to the costs and confusion - but this is getting easier too.

    It is also a lot easier using 'member financing' - i.e. making the members or a related family trust the lender to the fund rather than a bank - i.e. the members take out a line of credit and loan the proceeds to the fund via the debt trust to buy the property.

    If you have to use a bank, in my experience Westpac are pretty good, but the other major banks should also be able to do it. I think Westpac does a 72% or 73% LVR on residential property for a debt trust - which fits in with your 40%

    With the tenants in common option, it is ok provided you have the ability to finance it without using the property as security. There is no way around this and your auditor (if they know what they are doing) will do a title search every year to check!

    You age also will impact on it. The older you are, the better it is to have investments in an SMSF. If you are under 40 you might be better off trying the tenants in common option.

    Hope this helps. This is a complex area so seek competent advice! :)
     
  3. pestgirl

    pestgirl SMSF novice

    Joined:
    28th Apr, 2009
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    Location:
    Windsor nsw
    SMSF - tenants in common

    Hey thanks Superman for your post
    I agree that we need competent advice however - many people seem to have a hiden agenda - i.e. they get commission to push their product.
    If you know someone in Sydney (western suburbs would be great - but not essential) that can give advice - fee for service and is across all areas of SMSF's - I would appreciate the contact
    Have a great day:D
     
  4. pestgirl

    pestgirl SMSF novice

    Joined:
    28th Apr, 2009
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    Location:
    Windsor nsw
    Hey superman
    One other point I forgot to ask - you said that we can't use the property as security - but we could use other properties as security that aren't in the super fund couldn't we??
    Thanks again :)
     
  5. Billv

    Billv Getting there

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    Location:
    Sydney, NSW
    pestgirl

    I went to a SMSF seminar in Parramatta and it was an eye opener.
    These guys know all the tricks in the book.

    They often have SMSF seminars in Parramatta and if they can't fill the seats they offer the remaining places to their newsletter readers for free.

    register for the newsletter at
    TRUSTDEED.COM.AU Deeds you can trust

    Go to the evening session because it's more detailed and you can stay back after the seminar and ask questions. All this for free, the seminar is normally $55 and Manoj otherwise would charge $240/h .
     
  6. Superman

    Superman Well-Known Member

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    Location:
    Gold Coast, QLD
    Pestgirl,

    Check out SPAA to find an SMSF adviser in your area:

    SPAA - Find a Specialist

    Based on what you are looking to do you need an accountant who can not only advise on the SMSF aspect, but look at your situation as a whole.

    Maybe not a financial planner as although they will also have the SMSF knowledge, but their expertise would be in financial products / investments rather than property related 'stuff' like you are doing.

    Maybe the person referred to in the previous post is a SPAA member.

    Good luck and keep us updated with your progress.

    SM
     
  7. pestgirl

    pestgirl SMSF novice

    Joined:
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    Posts:
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    Location:
    Windsor nsw
    Thanks superman & Billyv
    I will keep you posted on my progress - I will certainly check out the SPAA members
    Cheers :)
     
  8. SMSFMAN

    SMSFMAN SMSF Specialist Advisor™

    Joined:
    11th May, 2009
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    Location:
    Castle Hill, NSW
    Depending on your tax rates and time to retirement either the use of a SMSF Borrowing Strategy or Tenants In Common strategy may be suitable. The SMSF Borrowing Rules are new and you need to be careful to get proper Legal and Wealth advice before proceeding but the tax benefits can be substantial.

    Also please consider the worst case sceanarios as if one member dies or is disabled and the fund has not been organised properly you may need to sell the porperty at the wrong time. Some insurance strategies as well as estate planning can make sure you are ready for this eventuallity.

    best wishes

    Liam

    "Look beyond the benefits and be prepared for the traps"
     
  9. Superman

    Superman Well-Known Member

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    Location:
    Gold Coast, QLD
    I reckon SMSFMAN and I have been going to the same conferences!

    Good advice all round :rolleyes: