SMSF Property Loans: Borrow 90% LVR!

Absolutely! You can buy property using your superannuation, but you’ll need a Self-Managed Super Fund (SMSF) to do it.

An SMSF is a type of superannuation fund you manage yourself. Unlike regular super funds, SMSF’s allow direct property investment, giving you more flexibility in building your retirement wealth.

Key features include:

• Direct investment in property (residential or commercial)
• Ability to borrow money for property purchases
• Combining your super with family/friends to increase deposit.

Deltos Finance is a mortgage broking firm that specialises in SMSF property investing. We manage the entire loan process - assessing borrowing capacity, finding suitable lenders, preparing applications, and negotiating competitive rates and terms.

As mortgage brokers, we focus solely on lending. For comprehensive SMSF strategies, tax implications, or fund structure advice, clients should consult financial advisors or accountants. We work alongside these professionals to provide a well-rounded service for SMSF property investors.

SMSF property loans offer fantastic deposit options. For residential investments, some lenders allow as little as 10% deposit plus costs, with loans up to 90% LVR.

Commercial property investments typically require a 20% deposit, with loans available up to 80% LVR. We’ve helped SMSF investors start their journey with only $100,000 in super!

SMSF property investing offers three main tax benefits:

• Lower tax on rent & CGT: Within superannuation, rental income and capital gains are typically taxed at 15%. This rate is often significantly lower than personal income tax rates, which can be as high as 45%.
• CGT discount: If your SMSF holds a property for more than 12 months, the tax rate would typically be 10% (as you only pay CGT on two-thirds of the gain)
• Tax-free earnings in retirement: Once the SMSF enters retirement phase and starts paying a pension, rental income and capital gains can be tax-free.

You should ideally budget for the following general costs:

• SMSF setup fees: Around $5,000
• Stamp duty & Rego: Varies by state & purchase price
• Conveyancing fees: Around $1,500
• Legal advice: Around $1,000 per person
• Bank and valuation fees: Around $1,000
• Lender risk fee: If less than 20% deposit

These figures are only general estimates. Speak with our team for an accurate quote.

SMSF interest rates are typically about 1% higher than normal home loan rates. This is mainly due to the added complexity for banks when assessing these loans.

No, traditional LMI isn't applicable to SMSF loans. However, if the SMSF has less than a 20% deposit, some lenders may charge a risk fee. This fee is similar to LMI in purpose, protecting the lender against higher default risk. This risk fee varies between banks and depends on the loan size you’re applying for.

Yes, at Deltos Finance, we can help you secure SMSF loan pre-approval before your SMSF is fully set up. This is only available through our partnerships with certain banks and allows you to confirm eligibility for SMSF borrowing without incurring setup costs of the SMSF upfront. It's a risk-free way to explore your options!

You can still buy property with an SMSF even if your personal borrowing capacity has reached its limit. SMSF borrowing power is based on the fund's financial position, not your personal finances. Banks consider the SMSF's assets, income (including rental income from the investment property), and your super contributions when assessing borrowing power for a loan.

Most lenders typically look for a credit score of 600 or above for SMSF finance. A score below 600 won’t automatically disqualify you, but it’ll likely limit your options.

No, an SMSF cannot borrow money to construct a new property from scratch. SMSF loans are only permitted for purchasing existing properties. However, an SMSF can:

• Buy an existing property and make minor improvements
• Use cash in the fund to build a property without borrowing
• Purchase off the plan property once construction has finished

We always recommend speaking with your accountant or financial advisor to ensure compliance within your SMSF.

A Limited Recourse Borrowing Arrangement (LRBA) is a specific type of loan structure that allows Self-Managed Super Funds (SMSFs) to borrow money to invest in property. It's the only way an SMSF can use borrowed funds to purchase an asset.

In an LRBA, the SMSF borrows to buy a single property, which is held in a separate bare trust. The 'limited recourse' part means if the SMSF defaults on the loan, the bank can only claim that specific property as collateral. This protects other SMSF assets, limiting the risk to the fund's overall wealth.

For SMSF property investment, the recommended structure involves two parts:

• The SMSF itself, with a non-trading corporate trustee (not an individual trustee).
• A bare trust to hold the property, with a separate non-trading corporate trustee.

This setup is preferred by the majority of banks. The SMSF's corporate trustee manages your super fund, while the bare trust's corporate trustee holds the investment property. This arrangement ensures compliance with the ATO and offers more lending options.
We can recommend an accounting firm that specialises in SMSF set-up for property investment if your existing accountant isn’t familiar with this structure.

While many lenders require an SMSF to have leftover cash after purchasing a property, at Deltos Finance we have access to specialist lenders who don't require this buffer. This benefit means you can purchase with less cash available in super.

The process of rolling over funds from your current super fund to your SMSF typically takes about 1-3 weeks and will depend on the superfund you’re with.

Yes, SMSFs are required to pay stamp duty when purchasing property.

No, unlike property held in your personal name, you can’t access equity in an SMSF property by refinancing. This is due to strict regulations around SMSF borrowing.

For this reason, we recommend using as little deposit as possible if your goal is to buy multiple properties. This strategy allows you to retain more cash for future investments. Speak with an accountant to ensure this aligns with your personal situation and goals.

No, you can’t live in a property bought through your SMSF. Self-managed super fund property investments must be for investment purposes only, not personal use.

Setting up a compliant SMSF structure for property investment generally costs around $5,000 but can vary depending on the accountant used. Accountants charge an ongoing management fee for the SMSF as well – which is usually around $1-2k per annum.

Absolutely! Your business can lease the SMSF property at market rates, effectively paying rent to your own super fund. This arrangement ensures a stable, long-term tenant for your property while providing your business with location security.

We recommend allowing for a longer settlement period than usual when buying an SMSF investment property. A good rule of thumb is allowing 21 days for finance and 60 days for settlement. This extra time allows for slower processing of SMSF applications and ensures a smoother transaction.

Major banks have largely stepped away from SMSF loans for three main reasons:

• Complexity: SMSF lending requires specialised processes and expertise, increasing operational cost for banks.
• Small market share: SMSF loans represent a relatively small portion of the overall loan market, making it less attractive for larger banks.
• Resource allocation: Banks prefer to focus their resources on more profitable and less complex loan products that serve a larger customer base.

Despite this, many smaller lenders still offer SMSF loans with great terms for investors!

It's best to apply for finance when you’re 2-3 months away from buying. Here's why:

• It confirms your borrowing capacity before you start property hunting.
• It can speed up the final approval process once you've found a property.
• It can provide an advantage over other buyers as you have finance in place.
• Some lenders offer pre-approval even before your SMSF is fully set up, saving time and potentially avoiding unnecessary setup costs.

Typically, pre-approvals are valid for 3-6 months, giving you plenty of time to search!

Yes, you can renovate a property owned by an SMSF, but there are important guidelines to follow. Routine maintenance/repairs are always permitted, and minor improvements are generally allowed. These can include updating kitchens or bathrooms, painting, or replacing the flooring.

For properties with an existing loan, restrictions are greater. Renovations can't change the property's fundamental character or nature. For example, you couldn’t convert a residential property into a commercial property or significantly change the structure.

SMSF compliance rules can be confusing, so it’s always recommended to speak with your financial advisor or accountant before proceeding with any renovations/changes.