Below is a simple summation of time frame in setting up and purchasing a residential/ commercial property in a SMSF
How long does it take to set up a SMSF and gain approval for an SMSF Loan:
The longest component is establishing the SMSF. This can take up to 8 weeks as opposed to purchasing a property in a company name or individual/s . This is due to the fact that they are more complicated.
What is a Typical structure of an SMSF Loan:-
A) the borrower establishes the SMSF and a Custodian / Bare Trust ( property trust deed)
B) The Trustee of the SMSF selects an residential or commercial property to purchase
C) The Trustee/s of the SMSF appoints a Custodian ( property Trustee or Bare Trust ) to purchase the investment property on its behalf.
D) The trustee of the SMSF seeks an application for finance with a lender
E) The SMSF pays the deposit( from funds held in its superfund) on the property being purchased.
F) The Property Trustee ( also known as the bare Trust) will purchase the property and become the legal owner of the investment . It is the purchaser known on the Contract for sale. The SMSF will obtain the beneficial interest in the property.
G) The loan is in the name of the SMSF ( not to the property/ bare Trust)
H) The lender takes a mortgage over the legal interest in the property from the Property Trustee and a charge over the beneficial interest in the property from the trustee of the SMSF. There is NO Recourse of the assets of the SMSF other than the security property.
I) A Guarantee is taken by the lenders from the beneficiaries of the SMSF. Collateral security CANNOT BE TAKEN from the SMSF itself.
J) Loan funds can only be used for the purchase of a property or refinance of a property and there can be NO further redraws or additional borrowings.
In addition to the above, the SMSF must be able to demonstrate it’s capacity to service the proposed funding.
The loans for SMSF are now under the format of a Limited Recourse Borrowing Arrangement ( LRBA) meaning if the borrower defaults on their loan repayments, the lender can ONLY take the asset with the loan against it and not claim any of your other fund assets.
For more details on SMSF lending , please Call Paul on +61 3 9598 9222