Your SMSF has assets in cash, this is used for a partial payment of the purchase of the property and acquisition costs, and then uses borrowed funds to pay for the rest of the property. This uses the real estate as security with a limited recourse loan.
In the event a loan default, the financier only has recourse against the property it cannot claim any other assets held in the SMSF.
The SMSF makes the payments on the loan using rent paid by the tenant of the property.
Strategy Benefits
- Other SMSF assets are secure as the lender does not have recourse to claim other super fund assets
- Rental payments can be used to pay off the loan
- Capital gains on property disposal would be taxed at concessional rates
- Allows the unlocking of equity currently held in a property already owned by a family business.
Considerations
- The SMSF trust deed must allow borrowing under an instalment arrangement
- Any investments should be made in accordance with the SMSF strategy
- SMSF require enough cash flow to maintain payments to the lender
- All agreements must be made on commercial terms
- All borrowers should seek independent financial advice
Contact Allied Capital today to find out more.
Allied Capital is far more than a specialist Business Finance Broker. We have the expertise and experience to specialise in Commercial Finance, Property Investment Finance, Construction Finance as well as Specialist Equipment Finance. Whether you are looking at Franchise Finance or Commercial Loans, Industrial or Retail Property Finance let Allied Capital’s business finance brokers source one of the best financing packages available, tailored to your particular circumstances.