Using SMSF to invest in US Property

I dont see why not, certainly from an Australian perspective. The only possible issue I can see is with regards to tax laws in the United States, how is it taxed over there? Can foreign entities own property in the U.S?

Certainly an interesting question,I would be interested to see what others have to say on this.

• This reply was modified 9 years, 5 months ago by  tanner892.

Hi Jamie –

The answer is yes you can however there are a number of important compliance considerations before you proceed.

Up to 18 months ago, no lender in the states would lend to a SMSF, now there are two specialist lenders who have a product that can be tailored for SMSFs under a limited recourse borrowing. Rates are higher than here (6.99%) and the process is extremely different.

There is some detail here in terms of considerations https://redwoodadvisory.com.au/us-property/ (mods delete if you like but this tells everyone what they need to know.

Heres a summary of Superannuation compliance issues:
1. Get advice for SIS compliance – don’t use US marketers to buy property!
2. Name of the borrower needs to be SMSF not LLC – there is a way around this
3. Bank accounts needs to be an Approved deposit taking institution to meet the in house rule
4. Managing member of the LLC is extremely important – it is not your personal name
5. Declaration of Trust needed as property is in the name of the LLC as is the bank account. Need to prove beneficial ownership by the SMSF
6. LLC per property for effective asset protection
7. don’t buy in high crime neighbourhood – property is cheap for a reason…DUE DILIGENCE please – try to buy wholesale not through US marketers who will sell you C Class rubbish and when shit hits the fan wont answer your calls
8. Property management is important.
9. FX transfers will occur- I have a FX provider I use, this account needs to be in the SMSF name
10. Lastly, you need a BARE TRUST, so many people buy property with a borrowing and come to me after not passing audit, this costs money and is required for SIS compliance (s67A)

This is not a complete list, you need to seek professional independent advice before proceeding with purchasing property in the USA and this is focus area of the ATO believe me. I will also state the majority of loans that have been written by US lenders are NON-compliant, most likely your auditor will not know that, but if you have borrowed in the US and you are unsure let me know and I will let you know what needs to happen. Remember the US promoters will say everything is compliant, its not til the ATO comes to you with an audit that you will find out and the penalties are significant.

As a result – my firm now completes the LLC set up and organise finance for clients to ensure they are compliant.

Long post but I really hope you can check each point off before you buy. I will say I am not a property promoter – I just specialise in the structures and have seen some really horror experiences.

Nigel – thank you for the kind words – you have heard me cover the above on numerous occasions.

Trust this helps

Cheers Ivan