Hi everyone, I am looking for advice on purchasing 2nd IP. We purchase our properties through our SMSF. Our 1st property is positively geared. We are looking at property in regional NSW. We can afford 20% deposit. What are your thoughts on interest only finance. This property is already rented and will be positive geared also. Cheers And thanks Peter
CF+ created by potential tenants bidding for property to rent. due to shortage in the Hunter region. The tenants that are in the house bid $50.00 over the rent that we thought we would get. After all purchase costs, the tenants are actually paying the mortgage with a little left in reserve.
I thought that SMSF loans could not be interest only. In that they by definition have to be P&I in order to satisfy the fundamental super criteria which is to increase equity and maximise the benefit for the members. (which interest only loans do not unless prices go up, which they don't always)
ie to minimise risk they have to be P&I. (Plus the fact that they are limited recourse loans means the banks do not want to fiddle around with anything that has slightly more risk)
The SISA legislation makes no comment about the type of loan one must take out.
Interest only is a popular loan type for investors who have limited funds in their SMSF and want to try and eak out a second purchase although i must admit i am very much one in the P & I corner for SMSF lending.
Yours in Finance
Richard Taylor | Australia's leading private lender
SMSF and property work well, especially borrowing at 80% LVR IO with a 100% offset account. Positive gearing is even better. It won't be long before you save up the next 20% deposit in the offset for the next one.