All Topics / Overseas Deals / Using SMSF to invest in US Property

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  • Profile photo of JamieMariaJamieMaria
    Participant
    @jamiemaria
    Join Date: 2015
    Post Count: 1

    Can SMSF be used to invest in US Property?
    Assuming there is access to limited-recourse financing.

    Has anyone done this successfully?

    Profile photo of tanner892tanner892
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    @tanner892
    Join Date: 2013
    Post Count: 25

    I dont see why not, certainly from an Australian perspective. The only possible issue I can see is with regards to tax laws in the United States, how is it taxed over there? Can foreign entities own property in the U.S?

    Certainly an interesting question,I would be interested to see what others have to say on this.

    • This reply was modified 5 years, 4 months ago by Profile photo of tanner892 tanner892.
    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    The answer is yes but its a complex area

    The best person to deal with this is Ivan from Redwood he is based in Melbourne but knows his stuff better than anyone I have dealt with especially when it comes to buying property through a self managed superfund.

    If anyone asks me about buying property in the US through a superfund I put them in touch with Ivan.

    He is on the forum but can be contacted on 0425 622 226

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
    Email Me | Phone Me

    We have just launched a new website join our membership today

    Profile photo of RedwoodRedwood
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    @redwood
    Join Date: 2013
    Post Count: 340

    Hi Jamie –

    The answer is yes you can however there are a number of important compliance considerations before you proceed.

    Up to 18 months ago, no lender in the states would lend to a SMSF, now there are two specialist lenders who have a product that can be tailored for SMSFs under a limited recourse borrowing. Rates are higher than here (6.99%) and the process is extremely different.

    There is some detail here in terms of considerations https://redwoodadvisory.com.au/us-property/ (mods delete if you like but this tells everyone what they need to know.

    Heres a summary of Superannuation compliance issues:
    1. Get advice for SIS compliance – don’t use US marketers to buy property!
    2. Name of the borrower needs to be SMSF not LLC – there is a way around this
    3. Bank accounts needs to be an Approved deposit taking institution to meet the in house rule
    4. Managing member of the LLC is extremely important – it is not your personal name
    5. Declaration of Trust needed as property is in the name of the LLC as is the bank account. Need to prove beneficial ownership by the SMSF
    6. LLC per property for effective asset protection
    7. don’t buy in high crime neighbourhood – property is cheap for a reason…DUE DILIGENCE please – try to buy wholesale not through US marketers who will sell you C Class rubbish and when shit hits the fan wont answer your calls
    8. Property management is important.
    9. FX transfers will occur- I have a FX provider I use, this account needs to be in the SMSF name
    10. Lastly, you need a BARE TRUST, so many people buy property with a borrowing and come to me after not passing audit, this costs money and is required for SIS compliance (s67A)

    This is not a complete list, you need to seek professional independent advice before proceeding with purchasing property in the USA and this is focus area of the ATO believe me. I will also state the majority of loans that have been written by US lenders are NON-compliant, most likely your auditor will not know that, but if you have borrowed in the US and you are unsure let me know and I will let you know what needs to happen. Remember the US promoters will say everything is compliant, its not til the ATO comes to you with an audit that you will find out and the penalties are significant.

    As a result – my firm now completes the LLC set up and organise finance for clients to ensure they are compliant.

    Long post but I really hope you can check each point off before you buy. I will say I am not a property promoter – I just specialise in the structures and have seen some really horror experiences.

    Nigel – thank you for the kind words – you have heard me cover the above on numerous occasions.

    Trust this helps

    Cheers Ivan

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
    Email Me | Phone Me

    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

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