All Topics / Help Needed! / buy property overseas with SMSF

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  • Profile photo of cosmicstarcosmicstar
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    @cosmicstar
    Join Date: 2012
    Post Count: 3

    Hi,

    My first post here and am not sure if the post should be here or not. So please pardon me if its at wrong place.

    I have $60000 in my super right now and I wish yo buy a residential property overseas.

    The cost of the property is approx $150k and I want to start a SMSF and maybe get a loan for the remaining amount.

    Can someone please advise if I can do this ?? and what is the procedure ??

    I contacted the big banks and they said they don't give a loan for property purchased overseas.

    Please guide me. Thanks

    TJ

    Profile photo of MikeFMikeF
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    @mikef
    Join Date: 2008
    Post Count: 60
    cosmicstar wrote:
    Hi,

    My first post here and am not sure if the post should be here or not. So please pardon me if its at wrong place.

    I have $60000 in my super right now and I wish yo buy a residential property overseas.

    The cost of the property is approx $150k and I want to start a SMSF and maybe get a loan for the remaining amount.

    Can someone please advise if I can do this ?? and what is the procedure ??

    I contacted the big banks and they said they don't give a loan for property purchased overseas.

    Please guide me. Thanks

    TJ

    Hi

    Even if you find a lender (local/overseas) the borrowing will need to be done within the SIS Act Limited Recourse Borrowing Arrangement rules which requires that the property to be owned via a 'Bare Trust' structure.

     

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

    Exactly right Mike and this where it falls over.

    You wont find any US lender finance such a deal although there are ways to get a Australia lender to do it and comply with SIS but that will depend on your current equity position on your Australian Portfolio.

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of cosmicstarcosmicstar
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    @cosmicstar
    Join Date: 2012
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    Thanks for the reply Mke and QLD Mr Bond,

    I wish yo buy a property in India in my hometown.

    So if I setup a SMSF and then create a trust, will any lender give me a loan ??

    The property I wish to buy is about $150k and I will need a loan of about $100k

    Profile photo of MikeFMikeF
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    @mikef
    Join Date: 2008
    Post Count: 60

    Hi

    Sorry to say but no lender here will touch it.

    Profile photo of cosmicstarcosmicstar
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    @cosmicstar
    Join Date: 2012
    Post Count: 3

    Thanks Mike,

    what if I form a trust here and then take a loan from overseas bank ??

    Will that be ok ???

    Profile photo of MikeFMikeF
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    @mikef
    Join Date: 2008
    Post Count: 60

    Hi

    As long as you ensure that all Limited Recourse Borrowing Arrangement requirements are met and your investment strategy covering such an investment I can’t see why not.

    Only real issue will be whether an overseas lender will understand the structure and legislative requirements including the Limited Recourse nature that the loan documentation must cover.

    Get it wrong and your fund could be deemed non compliant and liable for penalties.

    Profile photo of John-USA-CommercialREJohn-USA-CommercialRE
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    @john-usa-commercialre
    Join Date: 2012
    Post Count: 50

    Here are a couple companies who did lend to foreigners on American property.  Since I deal mostly in commercial real estate I have been out of touch with the residential side for a bit; but try these and let me know how it works out.

    1. Patriot Home Funding

    Jim Pandolfi   jim.pandolfiAmyphf.com

    http://www.myphf.com

     

    2. Federated Mortgage Services

    Todd Campbell    954-561-1000

    http://www.federatedmortgageservices.com

    John-USA-CommercialRE
    Email Me

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

    No Australian lender would

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of John-USA-CommercialREJohn-USA-CommercialRE
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    @john-usa-commercialre
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    Not any lender, but I would need to know more details.  Property location, Loan to Value you can afford, property type, income producing or not, credit worthiness, etc…

    <moderator: delete advertising>

    John-USA-CommercialRE
    Email Me

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

    John

    Sorry without being funy i think you are missing the thread of the post.

    There are a few US lenders who will lend to individuals buying in the USA on a residential deal but the questions raised initially was could you borrow from a US lender to buy within a Self Managed Super Fund and the simple answer as Mike has mentioned is No.

    No US lender wil be aware of the legal requirements to buy inside a SMSF and are not going to vary their lending terms to accomadate such a request even if the borrow could explain the relationship between a Security Trust Deed and the SMSF.

    In Australia SMSF lending a specialised area and many lenders over here still dont understand the legal complications of getting it wrong. 

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of TZTZ
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    @tz
    Join Date: 2010
    Post Count: 70

    “An Australian Citigroup subsidiary, Citibank, has now started to facilitate loan transactions for Australians looking to purchase US property.” http://www.abc.net.au/pm/content/2012/s3480532.htm. This appears to be a new initiative. Perhaps contact Citigroup to see if they are planning to expand their services in the near future to include India, seeing we have so many Indian expats living in Australia?

    Profile photo of MikeFMikeF
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    @mikef
    Join Date: 2008
    Post Count: 60
    TZ wrote:
    “An Australian Citigroup subsidiary, Citibank, has now started to facilitate loan transactions for Australians looking to purchase US property.” http://www.abc.net.au/pm/content/2012/s3480532.htm. This appears to be a new initiative. Perhaps contact Citigroup to see if they are planning to expand their services in the near future to include India, seeing we have so many Indian expats living in Australia?

    Have confirmed via Head of Mortgages for Citigroup here in Aust that …….sure they lend for o/s purchases you just need A$ income and Australian located security/property.

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

    Guys this question gets asked so often and i dont think you are heeding the warnings that Mike and I have been giving you.

    NO and i repeat NO overseas lender is going to understand or even care about the SIS legislation and the Limited Recourse Borrowing requirements.

    Simple answer No Australian lender is going to take overseas security and no overseas lender is going to want to understand the legislation. If you can't pay cash for the property inside your SMSF overseas buy and borrowing in Australia.

    Cheers

    Yours in Finance

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

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of TZTZ
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    @tz
    Join Date: 2010
    Post Count: 70
    MikeF wrote:
    TZ wrote:
    “An Australian Citigroup subsidiary, Citibank, has now started to facilitate loan transactions for Australians looking to purchase US property.” http://www.abc.net.au/pm/content/2012/s3480532.htm. This appears to be a new initiative. Perhaps contact Citigroup to see if they are planning to expand their services in the near future to include India, seeing we have so many Indian expats living in Australia?

    Have confirmed via Head of Mortgages for Citigroup here in Aust that …….sure they lend for o/s purchases you just need A$ income and Australian located security/property.

    Awesome!

    Profile photo of 10000_Lakes10000_Lakes
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    @10000_lakes
    Join Date: 2012
    Post Count: 3

    Hi Good Morning,

    I came across this thread while googling "Limited Recourse Borrowing for Overseas Property via SMSF"

    Just read through it all, and I see information above regarding Citigroup AU offering loans to purchase property in the U.S — does this include the limited recourse structure for buying US property via SMSF?  — wondering if there has been any other developments since the last post in June….

    Similar to the original poster,  we've only been in Australia for a few years so our combined super balance is only ~50K.   But wanting to leverage that as a down-payment and structure the limited recourse aspect via a SMSF.

    Does Citigroup offer the limited recourse borrowing for overseas investment?   Surely there must be some Global banking product out there that recognizes this demand and opportunity.  HSBC Premiere banking, etc?    Cheers

      

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    10000_Lakes wrote:
    Hi Good Morning,

    I came across this thread while googling "Limited Recourse Borrowing for Overseas Property via SMSF"

    Just read through it all, and I see information above regarding Citigroup AU offering loans to purchase property in the U.S — does this include the limited recourse structure for buying US property via SMSF?  — wondering if there has been any other developments since the last post in June….

    Similar to the original poster,  we've only been in Australia for a few years so our combined super balance is only ~50K.   But wanting to leverage that as a down-payment and structure the limited recourse aspect via a SMSF.

    Does Citigroup offer the limited recourse borrowing for overseas investment?   Surely there must be some Global banking product out there that recognizes this demand and opportunity.  HSBC Premiere banking, etc?    Cheers

      

    Nope.

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Rick staRick sta
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    @rick-sta
    Join Date: 2011
    Post Count: 120

    Is the establishment of a SMSF viable with a super balance of 50 or 60K?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Rick sta wrote:
    Is the establishment of a SMSF viable with a super balance of 50 or 60K?

    Not really. But it would depend on the situation. It maybe possible for a member to lender money to the SMSF to do a deal. This money could be lend at nil interest. The deal done and the loan repaid etc.

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of 10000_Lakes10000_Lakes
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    @10000_lakes
    Join Date: 2012
    Post Count: 3

    Thanks for the input Terry, 

    I've only been researching this for less than 24 hrs, but I'm confident on what I've discovered so far.

    Using guidance from the linked document below to understand the legal/structuring requirements for limited recourse borrowing w/SMSF>  

    http://ntaacorporate.com.au/documents/SMSF%20Limited%20Recourse%20Lending%20Memorandum.pdf

    I have found a correlation between what a US "Title Holding Trust" offers and the requirements outlined in the doc.

    And I have just located anecdotal evidence that Washington Mutual and Wells Fargo Bank offer financing for investment properties (non-owner occupied) held by a Title Holding Trust. 

    Too hard and new doesn't = impossible.

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