If you are considering investment in a property investment or development project, it is important to consider how the fund is to finance the project. Generally, this can be achieved by:
- Taking a limited recourse loan under section 67A and 67B SISA (external financing)
- Utilising its existing assets (i.e. internal financing)
- Entering into a joint venture with other investors
- A combination.
After setting up the fund (link to setting up a fund) there are several steps involved when borrowing funds to purchase a property. Lending involves the skills and use of a:
- Financial Planner,
- Mortgage broker,
- the banks credit assessor,
- the banks solicitor,
- Property valuer,
- Real Estate Agent
- and an accountant.
As you can see there are many people to deal with when looking to purchase a property within superannuation. CA Financial Services prides itself in providing the one source of contact when dealing with property in self managed super.
The idea of investing in property may sound exciting but there are many costs involved. CA Financial Services will explain every cost in detail for you. We are also Accredited Mortgage Consultants and we can source the best no available for you.
Issues for SMSF trustees to consider with geared investments are:
- The sole purpose test – assess the situation to ensure the investment is for the sole purpose of providing member benefits at retirement.
- The investment strategy – are the fund’s investment strategy and risk management procedures in line with their investments?
- In-house rules – do they apply?
- Related party acquisitions – a super fund is prohibited from acquiring assets from members and related parties except for business real property and listed securities.
- Arm’s length – the terms and conditions of the borrowing arrangement must be as if the transaction were done at arm’s length.
- Cash flow – the fund must have sufficient cash flow to pay interest.
- Commercial matters – assess the investments from a commercial viewpoint for acceptable returns and expenses such as tax (including CGT and land tax) and stamp duty.
- Regulation – caution needs to be exercised when considering the application of any changes to the rules or potential changes to the rules.
Get Started today! Book an appointment with a CA Advisor
Carole was fantastic throughout the process of restructuring our loan. She got us a great deal and explained all the features and how we could use them. I had plenty of questions along the way and Carole answered them promptly and simply. I would recommend Carole to anyone seeking a new mortgage or financing an existing loan. Ben Harper, Nestle – Demand & Supply Planning Manager