Hello Everyone,
I have a question regarding a smsf and an investment property,
My brother and his wife purchased an investment property a few years ago using an interest only loan.
1. Their loan is for about $350,000.
2. They repay about $600 per week.
3. They receive $300 a week in rental income.
The my brothers wife has just recently stopped work due to illness so therefore has no income. She has about $200,000 in superannuation.
My brother still works and earns about $80,0000 a year. He has about $100,000 in superannuation.
With their change in circumstance they would like to if possible pay off approximately half their investment loan with their superannuation money therefore leaving themselves in a position where the rental income would approximately equal their loan repayment. This would mean that they are no longer out of pocket $300 a week.
At this point in time they don't have a smsf.
Everything I have read has been in regards to buying an investment property through your smsf but this situation is different because they have already purchased the property some time ago under their own names.
My question is, is it possible to create a smsf and then put money from that smsf into their investment home loan? If so, what procedure would they need to follow and what costs could they expect to incur through the process?
I appreciate any help on this matter.
You can't donate your smsf money to yourself no. The only way to get money out of super before you are of retirement age is to plead and prove hardship.
So really what you are asking is can the smsf loan the money to yourself (in which case interest would have to charged). I'm almost certain you cannot loan money from your smsf to yourself. It was covered in another thread recently. The finance boys will turn up soon and confirm I am sure. Either way, what would be the point. Either way you would have to pay interest to someone (the smsf, or the bank). So no point doing this.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
No they can't do that unless If either one of them has met a condition of release they may be able to get a lump sum.
There is a condition of release met if:
1. over 55 years of age and work less than 10 hrs
2. financial hardship
3. temporary or permanent disability
4. terminal medical condition
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
As Terry stated, they can't take money out of their superannuation unless they meet a condition of release.
If they created an SMSF, they wouldn't even be allowed to buy the property from the individuals, as this would breach the related party rules.
Thank you all for the replies.
Just to clarify, they could purchase another investment property under the name of a smsf but they cannot use funds from the smsf to put into an existing investment property because its in their individual names? Is this correct?
Thanks
Correct.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Chris – I sent you a PM
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks for the clarification.
Chris bang on nothing to stop them starting their own SMSF and buying a property with a decent gearing.
In saying all of this get them to check the wife's Superannuation as you may find it provides some income protection and TPD benefits which depending on her illness she maybe able to claim on.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
And there is the great man himself. Chris this is the Richard Taylor I just PMd you to recommend. No need to make your SMSF a traumatic and difficult process. Get the right folks on board and it is smooth sailing. Richard is your man.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Ok will do, thanks for the advice.
This is actually pretty annoying because her super fund returned negative for the last year while she is paying 7.09% interest on an investment property. So in essence I thought she could simply use her super fund to pay some of her investment loan to basically be 7.09% better off guaranteed. Anyhow I guess we will just have to deal with the system that's in place.
Ok thanks JacM, I will keep that in mind.
aussiechris wrote:Ok will do, thanks for the advice.This is actually pretty annoying because her super fund returned negative for the last year while she is paying 7.09% interest on an investment property. So in essence I thought she could simply use her super fund to pay some of her investment loan to basically be 7.09% better off guaranteed. Anyhow I guess we will just have to deal with the system that's in place.
If only it were possible, this would be great wouldn't it.
But it would defeat the whole purpose of super – which is to provide for retirement. If people got access to it now most of them would blow it all and then rely on the pension.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Can't they refinance or get a better deal 600 a week for 350k sounds like a lot? Is it an interest only loan?
Yes its an interest only loan for $357,000. They have never invested their own money before and they were approached by a property investment group that promised them the world and basically they were scammed and now they are paying for it. They owe more on the unit then what its worth and they are paying more interest on it then they could have gotten elsewhere and they payed the investment group a lot of money to set it all up, its infuriating.
They tried to refinance and were informed that they would have to pay out $17k in order to do so.
I have a large amount of experience in the finance industry, not so much in regards to smsf's but none the less I could have at the very least guided them in the right direction but instead they were given the hard sell and pressured into doing something without thinking it through.
If they are paying $600 per week then their interest rate must be 8.74%. Are they fixed?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yes i am with you Terry must be a Fixed rate.
Hopefully will expire in the not too distant future.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
What a nightmare.
Name and shame the property ‘investment’ group? This thread may even come up in search results if other people thinking of using them search online for information (or dirt..) about them before ‘investing’…
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