SMSF Loan Process
Below is a quick overview of the SMSF Loan process once you decide to invest in a property through SMSF
Check the project feasibility with one of our SMSF Specialists
The first step in the SMSF Loan Process is to speak to one of our lending specialists to understand if borrowing is possible with your given income and the superannuation balance.
Establish SMSF Structure
If you receive a green tick in the first meeting, then setup a SMSF and prepare a trust deed.. The trust deed sets out the rules and conditions under which the SMSF will operate. The SMSF trust must have trustees which are either the individual members of the SMSF or a Pty Ltd company with the members as directors. The SMSF needs to apply for an ABN and TFN. The corporate trustee will also require an ACN. The company name should be registered with the Australian Securities and Investment Commission (ASIC).
Get a Loan Pre-Approval
Once the structure has been setup, speak to one of our lending specialist to get a pre-approval before you start the property hunt.
Establish Bare Trust
Once a suitable property has been found, your accountant will then establish a Bare Trust. A Bare Trust is created for each property asset to be purchased by the SMSF. This ensures the lender only has legal recourse to the property asset held by each bare trust and not to other assets held by the SMSF. A Bare Trustee is also appointed at this stage and is usually a registered corporate entity (Pty Ltd company).
The Bare Trustee will provide administrative support for the Bare Trust and will sign the purchase contract for the property acquisition. The Bare Trustee will hold the property for the SMSF and act in the best interests of SMSF members. This registered name will be listed on the title of the property title within the SMSF finance deal.
Bare Trust can also be prepared before finding a property. As you won't have the asset details at that time, the account may put your current address and then update the deed once you have found the property.
The Contract of sale of the property with the Bare Trust Deed is then sent to the lender who had pre-approved the loan to get the loan formally approved. Though the Bare Trust will hold the property title, the loan agreement will be between the SMSF and the lender. The Bare Trust will hold the property as security for the deal and will guarantee the SMSF loan.
Manage Property and Service Loan
Once the loan is formally approved, the property will be settled and then the SMSF will manage the rental property and pay the recurring expenses. All the expenses and income will need to be managed through the SMSF Cash account as per the required compliance process.