All Topics / Overseas Deals / Purchasing in USA using SMSF

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  • Profile photo of smodrasmodra
    Member
    @smodra
    Join Date: 2010
    Post Count: 1

    Hi there,

    I am interested in investing overseas (probably USA) and want to do it thru a Self Managed Super Fund.

    Can anyone got any advice, etc on doing this?

    regards,
    Steve

    Profile photo of InvestinusGroupInvestinusGroup
    Member
    @investinusgroup
    Join Date: 2010
    Post Count: 7

    Hi Steve,

    Yes it can be done quite easily, although it is simpler to do if you do not borrow funds in the SMSF. I have personally not done it but I have advised about 15 or 16 people how to buy properties in the USA thrrough their SMSF. You need to set up a corporation in the USA that meets all of the requirements set out by ASIC and APRA here in Australia. You must also invest some of the funds into different asset class such as shares etc. For example 10% into shares and 90% into USA Property is ok.

    <moderator: delete advertising>

    Profile photo of FishfaceFishface
    Member
    @fishface
    Join Date: 2011
    Post Count: 5

    Hi Steve,

    I am also looking at buying property in the US through a SMSF. Have you managed to find out any useful info since your post?

    Fishface

    Profile photo of TassieJHTassieJH
    Participant
    @tassiejh
    Join Date: 2010
    Post Count: 41

    Hi Steve and "fishface"

    I cannot offer any answers but hoping someone else can…

    I was heading down the SMSF creation path in 2010 and was keen on the Australian federal NRAS scheme using SMSF but came across challenges with ANZ and other lenders so have "parked" the idea at this point.
    In the mean time we investigated the US property market and have purchased 2 properties – (1x 5br and 1x3Br Town House). These are purchased via an LLC (a US Limited Liability Company) with my wife and I as "managers" – co-owners of the LLC.
     
    I am still keen to put more into Super but concerned re the SMSF implications of purchasing foreign assets – ie US property implications of taxation on a SMSF vs other ownership. Trustee implications etc.
     
    We would love to build a portfolio with some set aside as "now money" but other segment insulated by the Super legislation. Unfortunately the Australian Super benefits/tax concessions are not mimicked by the US-IRS as they have different schemes that we as non-resident aliens of course do not qualify for.

    We are seeing a lot of complexity arising from setting up the LLC and bank accounts in the US for each property outside Super as we have done for the 2 purchased in 2010 let alone adding the ATO/SMSF compliance hurdles.

    Hopefully there is a simpler way that is all of the following
     profitable/
     legal/
     compliant  and simple
     

    Profile photo of Top Rental ReturnsTop Rental Returns
    Participant
    @top-rental-returns
    Join Date: 2009
    Post Count: 69

    Guys,

    We have many clients buying through their SMSF. We set up an LLC which owns the property and is in turn owned (or has a member of) the SMSF.

    Naturally a SMSF is not permitted to borrow funds – except to pay ATO debts i believe – which is crazy but it is what it is.

    We set up bank accounts in the LLC name which just collect the funds and then distribute back to the Super fund quarterly.

    Hope this helps

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi Michael & Browyn

    Hate to say you are mistaken.

    A SMSF is allowed to borrow to purchase a property and there are a couple of ways to do it.

    We have many clients we have assisted in purchasing property both here in Australia, USA and the UK within a SMSF.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of FishfaceFishface
    Member
    @fishface
    Join Date: 2011
    Post Count: 5

    Hi TassieJH,

    Are you convinced the LLC option is worth the hassle? I'm looking at buying some property in my own name in addition to the SMSF and I've read conflicting opinions on the benefits of using an LLC versus buying in your own name and just having good insurance if the tenant sues.

    What made you go the LLC path and are you happy with your decision.

    Scott

    Profile photo of TassieJHTassieJH
    Participant
    @tassiejh
    Join Date: 2010
    Post Count: 41

    Fishface – Scott,

    …"What made you go the LLC path and are you happy with your decision." … The $64 question  and the winner is …… I will let you know in 20 years after I have retired and all the taxation (IRS and ATO) hassles vs paperwork and compliance are forgotten as I twiddle my thumbs by the beach…….or in the local insane asylum !!!!

    The LLC route is contentious but appears to be mixed support on the international forums due to the benefits of the US pass through taxation and ease of ownership transfers as opposed to the complexities of State reporting and corporate governance.
    As an Australian investing in the US it allowed me to establish US bank accounts without physically "going there". I am also happy that I can treat the investments at arms length for other needs.

    If I was a US Citizen and buying down the road or next county I would probably buy in my own name with decent insurance….but I am not!   We are "non-resident Aliens" and have no idea what the future holds in the city / county and how the tax laws and compliances may change.

    In short I think it is a reasonable vehicle to establish the LLC with the SMSF as the "member" / manager but as always – check with your Australian advisors for the ATO/SIS compliance requirements and take 2 bex before lying down!!

    Profile photo of FishfaceFishface
    Member
    @fishface
    Join Date: 2011
    Post Count: 5

    Hi TassieJH,

    Ha ha – thanks for the post.

    Good point about the US bank accounts – I hadn't thought of that benefit.
    Did you incorporate in Delaware? Do you mind sharing how you did it and roughly how much it cost?

    I really need to research some more about the SMSF. Even if the tax benefits aren't great, it allows me to tap into some additional cash and put into an investment that I think will be hard to replicate in years to come.

    My plan is to have some US property in SMSF (bought for cash) and some in my own name (or LLC).

    Which part of the US did you invest in by the way?

    Scott

    Profile photo of SuttSutt
    Member
    @sutt
    Join Date: 2011
    Post Count: 1

    Hi, Anyone would be mad not to use an LLC or C-corp to purchase property in the USA. If using funds from a SMSF a C-corp is best. Why do I say you are mad? Because if you do not quarantine your assets you are leaving yourself open to loosing them all if something goes wrong and you are found liable. These structures are cheap and also not too difficult to set up. <moderator: delete advertising>. Cheers, Sutt

    Profile photo of FacilitatorFacilitator
    Member
    @facilitator
    Join Date: 2012
    Post Count: 14

    Would tend to agree here from an asset protection point of view.

    SMSF & LLC

    Needs to be set up with the SMSF as the member of the LLC as follows:

    ABC LLC

    ABC pty ltd ATF the ABC super fund

    borrowing:

    this is tricky due to the above setup. One could assume that the SMSF is purchasing shares in the LLC which then means it is an 'in-house' asset and the SIS act states these can be no more than 5% of the SMSF assets. There is an exception for "non-geared" corporations which would then preclude any borrowing in the SMSF name if using an LLC.

    If you did not use an LLC then i would assume borrowing is ok ASSUMING that you have set up the holding trust to establish 'non-recourse lending' AND t is within your investment strategy.

    Yeah so pretty straight forward

    Profile photo of USInvest-RyanUSInvest-Ryan
    Member
    @usinvest-ryan
    Join Date: 2012
    Post Count: 13

    Guys

    Yes you can buy through your SMSF, but you need the correct vehicle.

    Here's the thing, there are people on here claiming you can use leverage  (finance) with your Super.

    This is 100% INCORRECT at this point. Any one that does this can be in deep water. Maybe not today but in the very near future. There are actually companies on this forum saying this is possible and have gone through the procedure with clients.. Crazy, but that's what happens when cowboys get into any market.

    I can tell you without self promotion that US Invest wanted nothing more then to make such a structure legal. We spent more than $50,000 with 4 of the largest Australian legal companies, plus 3 different American legal teams to try to bring a solution to more than 200 ambitious US Invest clients. We could not find a satisfactory solution where  it stacked up against current superannuation law and their future investment interests.

    So you can use your Super if you want to purchase outright, but you can't currently use finance with your SMSF. It's just not legal right now, and anyone saying that it is  either does not have your long term interest at heart or they haven't done enough research to give a correct answer.  Sorry to the posters on this thread but the answer does not exist. At least a legitimate one anyway.

    Happy Investing,

    Ryan

    http://www.usinvest.com.au

    Profile photo of speedy gonzalesspeedy gonzales
    Member
    @speedy-gonzales
    Join Date: 2010
    Post Count: 149

    Ryan,

    We haven't seen eye to eye recently on some points but with this topic I agree with you 100%. Paying cash with your SMSF is no problem as long as you have the correct structure in place but my Accountant said under NO circumstances should the SMSF leverage to buy US property. He also raised an issue (which I didn't pursue as I lost interest) that I should also not open a US bank account for the SMSF as no banks in the US came under the banking act 1959 or something like that. Have you heard anything along these lines ?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Ryan sorry old mate you are incorrect there and i don't care how many times i say you legally able to borrow in your SMSF to purchase in the US, UK or any other Country under under S67A.

    Been doing it since Sept 2007.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Ziv Nakajima-MagenZiv Nakajima-Magen
    Participant
    @zmagen
    Join Date: 2012
    Post Count: 523

    I think Richard may be right there…here's another link discussing the issue – http://thedunnthing.com/tag/s67a/

    Ziv Nakajima-Magen | Nippon Tradings International (NTI)
    http://www.nippontradings.com
    Email Me | Phone Me

    Ziv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property

    Profile photo of Texas Cash Cow Investments AustraliaTexas Cash Cow Investments Australia
    Participant
    @texas-cash-cow-investments-australia
    Join Date: 2011
    Post Count: 71

    Hi Richard,

    We'd all love it if you can expand a little on this topic of a SMSF borrowing oversea's to purchase oversea's property…..not necessarily US property as I know you work for buyers of UK property as well don't you ?

    Seems there are two trains of thought & it depends who you speak to as to what answer you get.

    Profile photo of Ziv Nakajima-MagenZiv Nakajima-Magen
    Participant
    @zmagen
    Join Date: 2012
    Post Count: 523

    Any new info there? Also very interested in finding out.

    Ziv Nakajima-Magen | Nippon Tradings International (NTI)
    http://www.nippontradings.com
    Email Me | Phone Me

    Ziv Nakajima-Magen - Partner & Executive Manager, Asia-Pacific @ NTI - Japan Real-Estate Investment Property

    Profile photo of gazmatazzgazmatazz
    Participant
    @gazmatazz
    Join Date: 2012
    Post Count: 9

    Hi guys, hoping you can help:

    Also looking to buy in US, either through SMSF or cash. I need to know how I can set-up a US bank account from Oz as I spoke to a few companies of which some said they could do it, none have managed to actually come up with the goods.

    Would I do it with my LLC name? If I was to use a company selling property in the US could they make this happen or is that all a myth at this stage?

    Thanks,

    Gazz

    Profile photo of Texas Cash Cow Investments AustraliaTexas Cash Cow Investments Australia
    Participant
    @texas-cash-cow-investments-australia
    Join Date: 2011
    Post Count: 71

    gazz,

    I have a couple of sources for setting up bank accounts and no it's not a myth….it can be done. One bank will only open LLC accounts and not personal accounts and another bank does both a LLC & personal accounts but they both need to be established at the same time (i.e. won't open up just in personal name without opening one for LLC as well.

    Just do yourself a favour and don't think you have to pay for the service !!

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You will have have a look at the SIS Act and SIS regulations.

    A requirement is that any borrowings must be limited recourse and the assets of the fund cannot be mortgaged. This means the new property has to go into a separate trust which then provides the vehicle for the borrowings and offers the property as security.

    If this can be overcome then you could invest overseas and borrow to do so.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

Viewing 20 posts - 1 through 20 (of 24 total)

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