You don’t know what you don’t know and often individuals consider borrowing capacity in SMSF to be the same as buying in your own name.
Buying property in a Self Managed Super Fund (SMSF) has been very popular in recent times. From time to time, we speak with clients about this opportunity.
It is important to note that most lenders require a minimum superannuation balance (which generally starts at $200k) for you to be able to purchase in an SMSF. There are additional lender requirements such as the liquidity required once the property purchase is complete. The liquidity requirements vary from lender to lender, with some lenders requiring 10% of the property purchase price + assets (including cash left over in the fund).
For example: If you purchase a property worth $400k, and have other fund assets (e.g. cash) of $40k, i.e. total assets of $440k. At 10%, you will need to have $44k left over in cash.
SMSF serviceability can be tight, especially if there is one member making super guarantee contributions.
Before you go purchase a property in your SMSF – answer this – Am I done purchasing property in my own name? Have I exhausted my personal borrowing capacity?
If the answer is No, you should reconsider purchasing in your SMSF.
Once you have purchased in SMSF, some lenders will require the SMSF liability to be disclosed when you look to borrow in your own name. Whilst other lenders may not require the SMSF liability to be disclosed, given the current lending environment you do need to give thought to your finance strategy, because one move could hamper your ability to borrow with the next suited lender.
SMSF borrowing may impact your overall personal borrowing capacity. As such, it is important to exhaust your borrowing capacity in your own name, before you look to purchase in your SMSF.
If you would like assistance with financing your next home or investment property, contact us in [email protected] or call us on 1300 97 60 60 for a tailored finance solution.
To Get Started: Schedule A Chat with the Property Twins Team Join Our Exclusive Facebook Community of 6,000+ Property Investors: Property Addicts Australia Join our Exclusive Search & Select The Right Property in 90 Days 5-Day challenge
Note: Please ensure you always seek specific specific credit, tax, financial, legal or investment advice. Property Twins' Blogs are not a substitute for personal and specific, taxation, financial, legal or investment advice
