Forum Replies Created
- wisepearl wrote:So sounds like my possible scenario with the loan is not really acceptable under current SMSF guidelines.
Back to the drawing board
Correct
By the way you can't mortgage a part of a property only a whole property.
wisepearl wrote:Can a SMSF name go straight onto the tite? I recall reading something about SMSF investing in property through options or trusts or something more complex…
Are you suggesting that rather than a straight out "cash" loan direct to me for use on the property, the SMSF could say go on the title as 20% owner and therefore allow funds to be released at settlement?
Thanks,
EmmaAssumming that the in house asset rules (related party) are not being breached then the ownership or percentage thereof could rest with the SMSF. On title would be the name of the SMSF trustee either as a joint tenant or as tenants in common depending on how the ownership is to be structured.
However if the above is the case you can not then mortgage the property for a number of reasons.
1/ A SMSF can not mortgage a property unless it is done properly under the Limited Recourse Borrowing Arrangement (LRBA) whereby a bare trust needs to be established and property "owned" by this entity for the benificial owners of the SMSF and it's members.
2/ The ATO has previously considered joint SMSF investors owning an asset via one bare trust and determined (ATO ID 2010/172) that it was not possible where borrowings are being contemplated.
Whilst purchasing as tenants in common enables the SMSF to take ownership of a fixed percentage of a property, with another party (such as an individual or trust) owning the remaining percentage, the ATO considered that jointly borrowed under a single holding trust breached the law.
The ATO held that the requirement for the asset the SMSF trustee was acquiring to be held on trust and for the SMSF trustee to acquire a beneficial interest in that asset was not met because:
• the asset the trustee of the bare trust held was 'sole title to the residential property; but
• the interest the SMSF trustee acquired was only a partial interest in the property — that is, a joint interest with the other party, each as a tenant in common.
On top of this lenders want nothing to do with JV's and the like when SMSF's are involved.
Hi
As previous poster says……generally SMSF fund trustees cannot lend to or invest in a related party or related trust of the fund however they can in certain circumstances such as where the loan/investment is no greater than 5% of the market value of the fund's total assets.
hi
As others have said……it depends on a lot of things but overall financial risk assessment of the borrower by lenders is the main thing that drives end rate.
As an example, doing one now for extremely wealthy professional. Loan is stand alone $1.26M at 70% LVR for Sydney CBD strata commercial office suite. Variable rate to the borrower is approx 6.6% pa being BBSY plus customer margin 1.75%
robwilson wrote:Hi Guys,
What about the payday loan industry any of you guys had experience in this field ?Cheers
Rob
The Payday loan sector is finally getting some well needed attention.http://www.smh.com.au/national/screws-turned-on-loan-sharks-20110827-1jfb7.html
Hi
Whats the security for the loan? Is it resi or commercial?
So you think that the ATO can't see past that……..hmmm
Hi
My understanding is that the title deed determines the percentage of claimable deductions. ATO ID 2002/363 & TR 93/23 states;
"that the loss or income from a rental property must be shared according to the legal interest of the owners, except in those very limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title".On guaranteeing a loan in your husbands name…..I doubt that there is a lender out there that will entertain this as all will usually require you to be a co-borrower rather than a guarantor.
euro73 wrote:Thats good information Mike- thanks.Seems as though The Rock has a pretty competitive product. In the scheme of things, $300 or so in set up costs is pretty inconsequential, if they have superior borrowing capacity. Correct me if Im wrong, but I believe St G is priced at 7.80% and The Rock is at 7.89%? Not much in that, either…
Euro
Yes The Rock is competitive & rates you quoted are correct but not your set up costs of $300? More like $5K+
Estimated costs would be;
App fee $600
Legals $1850
Independent Legal Advice ?
Independent Financial ?
Mtg Stamp Duty ?
Set up security custodian $500 (Minimum)
Bare Trust documentation ?Sorry ……….I stand corrected on The Rocks LVR its now 70%
euro73 wrote:OK. My understanding was that the Rock has 70% LVR, no Personal Guarantee and more generous borrowing capacity than both St G and NAB…. and an app fee of $600. That would seem to make it a very good product in a side by side comparison. Is that not the case?The Rock servicing seems to be more generous (80% of all rental income & 100% of all historical contributions less tax 15%) and yes they have no PG's however I think LVR is still only 65%. Their variable rate is slightly higher than NAB or St George and not sure if they take into account future additional (salary sacrifice) contributions (above the usual 9%) unless you can show them over the past two years.
On fees you also need to take into account the lenders legal fees in addition to the app fee. When you do this the rock is $2450- compared to St George $2142-
For my money the dragon is still slightly ahead although I agree that their servicing calc may not suit everyone.
You will need to be careful with 2nd mortgage/caveat vendor finance behind a bank because the bank (1st mortgagee) will most likely have clauses in their mortgage documentation stating something along the lines of:
1/ that they must consent to any subsequent mortgage &
2/ that you cannot create another security without their consent and if you do you may be then deemed to be in default of the original loan/security arrangement.euro73 wrote:So the Rock and St George are amongst the better SMSF loan products then?If LVR is not an issue my preference would be St George or NAB
euro73 wrote:Richard/Mike.Pro's/cons of those three lenders products, versus the Rock and St George?
Too many to list here in detail and depends on your individual situation but here are a few;
Minimum net SMSF Asset Position – CBA require minimum $300,000
Variable Interest rates – vary 7.67% to 8.59%
Monthly/ongoing fees – from $8pm to $93pm
LVR’s 65% to 80%
Minimum Loan Amounts – $10,000 to $250,000
Bank application/legal costs range – $2,200 to $3,200
Will lend to individual trustees – Not at 80% LVRIn NSW so long as you live in the property as your PPOR continuously for 6 months commencing within the first 12 months following settlement you are entitled to both the FHOG and the stamp duty exemption if applicable.
Westpac & CBA being the others
maree_bradross wrote:god_of_money I checked out their website it has the following on SMSF:- Borrow up to 90% when guaranteed by yourself and the trustee, and secured against the property
- Borrow up to 65% when guaranteed by the trustee and secured against the property
You need to be either a doctor/dentist or accountant as Experien only provide facilities to people in the medical or accounting professions.
Max borrowing for residential property in SMSF is currently 80% but not all lenders go this high.
zaclan wrote:Great thanks for the info. I've found a property I'm interested in but the property will be leased until Mar 2011. I would plan to move in straight afterwards to avoid any hassles.. While the tenant is still there can I claim any deductions as an investment property or best not to claim anything? CheersHi
What state are you looking to purchase in as some states have different rules?
Tim
Please give me a call 02 9263-2631
Mike
Ash7261 wrote:Hey guys what is the tax advantages with IP in SMSF? is it the same as personal as in write off visits to the property for inspections?Does the income from the property count towards my contributions as i am currently at limit?
Regards
Ash
hi Ash
In simple terms contributions are taxed at 15% and the capital gains tax applicable when the property is sold is either 10% if you sell whilst you are contributing or Nil when you are in pension phase.
Rental income like investment earnings are also taxed at 15% .
If the property is negatively geared losses are trapped and can only be applied against future income derived by the fund ie can not set off against your own personal income.
In answer to your last question rent received does not count as a contribution.
Ash7261 wrote:what would you expect to pay someone to set up a Bare Trust and whatever is involved to buy a property in a SMSF?Ash
On top of SMSF establishment/set up costs and ongoing costs such as audit, a Bare Trust arrangement will cost you approx $1,000 – $2,000 depending on who you choose.
Borrowing costs/fees can be anywhere from $3,000-$4,000 upwards depending on the lender/loan amount and cover such things as Application/Approval, mortgage stamp duty, lender legal trust deed vetting costs, independent financial sign-off .
You will also need to have a reasonable amount of cash in your fund with most residential lenders looking to lend only up to a max 70%-72%.Whilst there a couple of lenders that do go to 80% their terms/conditions/interest rates are in my opinion excessive.
Having said this there are other ways to fund a SMSF property purchase such as a member loan but this may not suit a lot of people.
