บทถอดความฉบับเต็มของ Inside SMSF Borrowing And What Lenders Really Want

00:04:51.120 --> 00:04:54.560 The problem is you've got to cash fund it yourself through the SMSF. 00:04:54.560 --> 00:04:55.759 You can't borrow for it. 00:04:55.759 --> 00:05:02.959 The biggest change is obviously what security and what purpose lending can be used for within an SMSF arrangement. 00:05:02.959 --> 00:05:04.639 So the biggest thing is commercial. 00:05:04.639 --> 00:05:07.519 It has to be a specific type of security. 00:05:07.519 --> 00:05:11.040 It can't be just vacant commercial land and that type of stuff. 00:05:11.040 --> 00:05:15.519 It needs to be an asset that is income deriving. 00:05:15.759 --> 00:05:18.959 And um so that's the definition of the real property, isn't it? 00:05:18.959 --> 00:05:23.120 Is just to, you know, provide commercial aspects. 00:05:23.120 --> 00:05:23.759 Yeah. 00:05:23.759 --> 00:05:30.000 So that that's where the lending is limited now to just commercial, real properties. 00:05:30.000 --> 00:05:36.079 But the definition of real property in this case is the usage of the property. 00:05:36.079 --> 00:05:50.240 So the property that I want to clarify, it can be in R2 residential, but if it's being used as a commercial property to house a business, then it's still qualified because it's per use. 00:05:50.480 --> 00:05:56.879 Yeah, so the statutory test is real property used wholly and exclusively in one or more business for business use. 00:05:57.199 --> 00:05:57.360 Yeah. 00:05:57.360 --> 00:06:05.680 So um, since the 10th of August 2026, the government stopped RIBA lending pretty much. 00:06:05.680 --> 00:06:06.560 Is that is that right? 00:06:06.959 --> 00:06:07.759 Yes, for residential. 00:06:07.839 --> 00:06:09.360 Yeah, for residential for SMSF. 00:06:09.680 --> 00:06:11.120 Correct, for new purchases. 00:06:11.120 --> 00:06:17.120 You can still borrow in an SMSF for residential if you've already owned it and you're doing a refinance. 00:06:17.120 --> 00:06:22.639 So you can still refinance existing um held debts and structures and things like that. 00:06:22.639 --> 00:06:27.120 You just can't borrow for new acquisition in residential. 00:06:27.519 --> 00:06:27.759 Yeah. 00:06:27.759 --> 00:06:32.319 So have you had many inquiries since then about the changes? 00:06:33.040 --> 00:06:36.959 It's because it's only just happened on the 10th of August, and I know that was a couple of weeks ago. 00:06:36.959 --> 00:06:46.959 The biggest thing is getting everyone's strategy in SMSF and borrowing and investing in SMSF isn't the same as, oh, look, I wake up one day and I saw a property down the road and what did I buy it. 00:06:46.959 --> 00:06:49.199 There's just a lot of moving parts in it, right? 00:06:49.199 --> 00:07:03.199 And so, yeah, we are seeing it, but it's only just now is that stuff coming through because by the time your accountant looks at it, by the time your financial leader looks at it, by the time you get the legal structure in place, yeah, that now is only just now coming to fruition

with these changes. 00:07:03.360 --> 00:07:13.439 So I think a lot of listeners don't really understand how the SM SMSF lending different from the mainstream lending. 00:07:13.439 --> 00:07:15.920 So can you explain the process? 00:07:16.240 --> 00:07:22.240 So there's really three credit um sort of assessments that occur with an SMSF. 00:07:22.240 --> 00:07:26.000 So it's the borrower or the fund itself, um, the property and then the structure. 00:07:26.000 --> 00:07:26.399 Okay. 00:07:26.399 --> 00:07:31.680 So the borrower or the fund is the the SMSF itself is the borrower. 00:07:31.759 --> 00:07:32.000 Yeah. 00:07:32.160 --> 00:07:33.759 It doesn't actually hold the property though. 00:07:33.920 --> 00:07:34.160 No. 00:07:34.399 --> 00:07:35.360 A um a bear trust. 00:07:36.079 --> 00:07:36.160 Yeah. 00:07:36.399 --> 00:07:40.399 Property trust, custodian trust, whatever that that terminology is used. 00:07:40.399 --> 00:07:40.560 Yeah. 00:07:40.560 --> 00:07:42.319 Essentially it's a it's a property trust. 00:07:42.319 --> 00:07:46.000 Holds the property and pledges it to the SMSF for use as security. 00:07:46.000 --> 00:07:46.399 Yeah. 00:07:46.399 --> 00:07:48.319 So the borrower itself is the fund. 00:07:48.319 --> 00:07:50.959 You've got so there's again, there's multiple entities of it. 00:07:50.959 --> 00:07:51.439 Yeah, yeah. 00:07:51.519 --> 00:07:53.120 No, we talked about that last episode. 00:07:53.120 --> 00:07:53.839 So yeah. 00:07:54.240 --> 00:07:58.959 The the property itself, then, um, is a a definite credit criteria now. 00:07:58.959 --> 00:08:11.199 So they understand they want to understand uh the the the market yield or the property or the rental return, they want to understand the zoning, they want to understand the usage, you know, has it previously been rented out, they want to understand all that sort of stuff. 00:08:11.439 --> 00:08:14.160 So what you're referring to is that's the bank requirement. 00:08:14.160 --> 00:08:28.079 So in order for someone to obtain or you know, doing like ask you to do the borrowing capacity assessment for the SMSF, what would be um the first thing that you look for? 00:08:28.399 --> 00:08:31.040 So there's multiple things we we we have to do, right? 00:08:31.040 --> 00:08:33.039 There's there's a multiple questions we have to do. 00:08:33.039 --> 00:08:37.919 Does the property structure qualify as uh the a borrowing requirement? 00:08:37.919 --> 00:08:38.480 BRP. 00:08:38.480 --> 00:08:38.720 Yeah. 00:08:38.720 --> 00:08:40.240 Acceptable security. 00:08:40.240 --> 00:08:42.559 What is their the yield on that? 00:08:42.559 --> 00:08:47.440 What is the members' contribution to the SMSF or employee contributions to the SMSF? 00:08:47.440 --> 00:08:47.759 Yeah. 00:08:47.759 --> 00:08:51.679 They they look at how much liquidity is in the SMSF. 00:08:51.679 --> 00:08:57.919 So liquidity is how much um cash cash have they got in the business both now but also post-settlement. 00:08:57.919 -->

00:09:02.799 So there is some policy requirements in there that you need to have a certain amount of cash after you've settled on that property. 00:09:02.799 --> 00:09:04.559 So it's just a lot of little moving. 00:09:04.960 --> 00:09:05.120 Yeah. 00:09:05.120 --> 00:09:19.039 So what would be the deposit, like well, the cash contribution that the SMSF need to have, like in percentage, before they can look at reaching out to you and this is the hard bit. 00:09:19.120 --> 00:09:24.559 So SMSF lending is not the same as residential lending for mom and dad investors going out to buy buy a house down there. 00:09:24.559 --> 00:09:24.799 Yeah. 00:09:24.799 --> 00:09:25.279 Okay. 00:09:25.279 --> 00:09:29.360 So the SMSF lenders that are in this space, so there's not a lot in this space anymore. 00:09:29.360 --> 00:09:29.759 Yeah. 00:09:29.759 --> 00:09:30.000 Right. 00:09:30.000 --> 00:09:32.320 So we'd let's be let's be very clear on that. 00:09:32.320 --> 00:09:40.000 They they will borrow, they'll lend up to um some will lend up to 75% of the value of the property, some will end up to 80% of the value of the property. 00:09:40.000 --> 00:09:43.519 Some will reduce that percentage based on the postcode. 00:09:43.759 --> 00:09:44.159 Right. 00:09:44.320 --> 00:09:51.279 Based on the zoning of that property, based on the usage of that property, if it's an industrial warehouse versus a just a commercial. 00:09:51.279 --> 00:09:55.200 Um, so you've got to be there's no just like there's no cookie cutter, right? 00:09:55.200 --> 00:09:55.679 That's right. 00:09:55.679 --> 00:09:57.039 So it's no cookie cutter. 00:09:57.039 --> 00:10:02.879 That's why you need to have someone evaluate what your position is and work out a strategy. 00:10:02.879 --> 00:10:06.000 This is not something where, hey guys, I've bought a property. 00:10:06.000 --> 00:10:07.440 Can you now fund it for me? 00:10:07.679 --> 00:10:07.919 Okay. 00:10:07.919 --> 00:10:23.360 So basically the process is once they got advice from the accountant or the financial planner, well, then the next step is to reach out to a um mortgage broker like you, like specializing in um SMSF borrowing, and then you start their assessment. 00:10:23.679 --> 00:10:28.080 Yeah, so so like I said, you can borrow up to 75-80% of the value of the property, right? 00:10:28.080 --> 00:10:30.000 So you still need 20% of the property. 00:10:30.240 --> 00:10:30.879 25 to 30. 00:10:31.200 --> 00:10:32.559 You've got to factor in stamp duty. 00:10:32.559 --> 00:10:38.799 SMSF borrowing or or structures are not the same as just going out and borrowing again and borrowing a property. 00:10:38.799 --> 00:10:40.240 You need to have the structures in place. 00:10:40.240 --> 00:10:44.480 Yeah, it's getting foster a few grand to have this all set up properly, right? 00:10:44.480 --> 00:10:47.759 There is still application fees, there's valuation fees, right? 00:10:47.759 --> 00:10:49.519 Different to residential lending. 00:10:49.519 --> 00:10:53.120 The the fees within a lender could be a couple of grand as well. 00:10:53.360 --> 00:10:56.240 Yeah, what hits me is the establishment fee. 00:10:56.240 --> 00:10:56.559 Yep. 00:10:56.559 --> 00:10:56.879 Yeah. 00:10:56.879 --> 00:10:57.919 For for the loan. 00:10:58.159 --> 00:11:00.000 So again, this is lender specific. 00:11:00.000 --> 00:11:05.840 Some lenders will charge stupid fees and some will will actually couple of grand. 00:11:06.080 --> 00:11:06.320 One percent. 00:11:06.320 --> 00:11:06.720 Yes. 00:11:06.720 --> 00:11:10.879 You usually that's that's at least one percent, which is a lot. 00:11:10.879 --> 00:11:11.200 Yep. 00:11:11.279 --> 00:11:16.879 So you need the legal costs, you need the valuation lender costs, you need the holding trust and the SMSF establishment costs. 00:11:16.879 --> 00:11:21.600 There's potentially GST considerations depending on on the type of property and the transaction itself. 00:11:21.600 --> 00:11:26.879 And then again, you like I said before, you still might need some post-settlement liquidity. 00:11:26.879 --> 00:11:34.960 So some lenders, first markets it itself, yeah, they want 5% liquidity of SMSF value sitting in cash post-settlement. 00:11:34.960 --> 00:11:39.120 So they'll actually do the calculation, work out stam tuning costs, and work out whether or not you've got enough. 00:11:39.120 --> 00:11:40.720 If you don't have enough, nah, deal's dead. 00:11:40.879 --> 00:11:41.120 Yeah. 00:11:41.120 --> 00:11:41.600 Okay. 00:11:41.600 --> 00:11:47.360 So the next question I have is which banks are actually lending to SMSF at the moment? 00:11:47.360 --> 00:11:52.159 Because, you know, you and I know that the big fools don't play in this space anymore. 00:11:52.320 --> 00:11:52.480 Yep. 00:11:52.480 --> 00:11:54.320 So let me let me qualify something here, right? 00:11:54.320 --> 00:11:56.399 And and this is my opinion. 00:11:56.399 --> 00:12:00.080 The big boys got out of this 12, 11, 12 years ago. 00:12:00.080 --> 00:12:00.720 Okay. 00:12:00.720 --> 00:12:12.240 And the reason, the the primary reason they got out of this was there was a worry in the property market that people were creating a false market because SMSF in Resi was such a big thing 12, 13 years ago, right? 00:12:12.240 --> 00:12:15.600 Everyone was buying property in SMSF and it was creating a false market. 00:12:15.600 --> 00:12:24.000 And the government and the regulatory um bodies were worried that people's retirement fund could get smashed if there was a reality check in the property market. 00:12:24.000 --> 00:12:24.639 Okay. 00:12:24.639 --> 00:12:26.320 And so they handbraked it, right? 00:12:26.320 --> 00:12:30.000 And effectively, that's now what the government is now pushing harder now. 00:12:30.000 --> 00:12:35.519 So for me personally, I understand it's going to hurt some investors here, but I actually understand why they're doing it. 00:12:35.519 --> 00:12:47.600 You've still got if if

everyone's pulling their money out of these industry funds and sticking in SMSF and then trying to buy all this property, and then then there's a property handbrake because what was happening at the moment, and you've got negative equity, people can't retire. 00:12:47.600 --> 00:12:51.759 And then is there going to be more pressure on the government, more pressure on pensions, more pressure on social. 00:12:51.759 --> 00:12:52.480 Yeah. 00:12:52.480 --> 00:12:54.080 So I understand why they're doing it. 00:12:54.080 --> 00:12:58.720 So back on lenders, you've got you've got about half a dozen that are playing in this space. 00:12:58.720 --> 00:13:02.480 So the likes of Pepper Money, Liberty, Latrobe, First Mac, Red Zed. 00:13:02.480 --> 00:13:02.799 Yeah. 00:13:02.799 --> 00:13:04.480 So there's so there's there's a few in there. 00:13:04.480 --> 00:13:09.840 And again, some will charge higher fees, some will borrow, lend you, yeah, 75% to 80%. 00:13:09.840 --> 00:13:12.879 Yeah, so there's there's there's definitely a few out there. 00:13:13.039 --> 00:13:22.960 Yeah, so there's still options out there, just not the big fours and the typical banks that would lend, you know, for the the standard loan. 00:13:22.960 --> 00:13:24.960 And and these banks know that, right? 00:13:24.960 --> 00:13:26.080 Yeah, so they're charged. 00:13:26.960 --> 00:13:27.120 Yeah. 00:13:27.120 --> 00:13:28.080 Interest rates. 00:13:28.080 --> 00:13:30.399 Don't don't come to a broker going, yep, cool. 00:13:30.399 --> 00:13:36.399 Uh, you know, I've done some chat GPT numbers and um, you know, borrowing at six and a half percent. 00:13:36.399 --> 00:13:37.279 Yeah, it's not that. 00:13:37.279 --> 00:13:43.440 If you're gonna borrow at eight, eight percent, and if you're gonna borrow at 80% for the commercial property, you are gonna be looking in the eights. 00:13:43.440 --> 00:13:43.759 Yeah. 00:13:44.720 --> 00:13:44.879 Yeah. 00:13:44.879 --> 00:13:45.279 Yeah. 00:13:45.279 --> 00:13:48.559 So that there are ways around it, which we've done. 00:13:48.559 --> 00:14:03.600 You know, if you the, you know, the the members of the self-nessed super funds actually have equity in their home, they can actually borrow against um the equity and then also lend it to the self-nessed super funds. 00:14:04.000 --> 00:14:05.759 So it's a two two application process. 00:14:05.759 --> 00:14:12.879 So they they gear up on their on their equity within their personal property to create a contribution to their SMSF and Yeah. 00:14:12.960 --> 00:14:15.039 Well, it it doesn't need to be contribution. 00:14:15.039 --> 00:14:18.799 It can also be like um an R L RBA to themselves. 00:14:18.799 --> 00:14:34.320 So it will be if we go that way, that direction, it will be to me, it, it's quite it's a lot more cost effective because you don't pay for the loan establishment fee for the SMSF, which is a thousands of dollars in saving. 00:14:34.320 --> 00:14:35.039 Yeah. 00:14:35.039 --> 00:14:54.720

So what you can do, correct me if I'm wrong, is you know, you can actually get an cash equity release from the their personal situation, yeah, and borrow against their home and then personal properties or whatever other securities are selling, yeah, and then do an RBA to the SMSF. 00:14:54.720 --> 00:15:01.759 And um, as long as there's an RBA agreement between the member themselves and the SMSF, that qualifies. 00:15:02.240 --> 00:15:02.480 100%. 00:15:02.480 --> 00:15:02.879 Yeah. 00:15:02.879 --> 00:15:03.360 100%. 00:15:03.360 --> 00:15:09.039 And it makes sense doing the the example that I use, and and I'm and let me, I'm gonna talk personally. 00:15:09.039 --> 00:15:09.759 Yes. 00:15:09.759 --> 00:15:14.240 So my business was previously paying $130,000 a year in rent, right? 00:15:14.240 --> 00:15:15.600 Commercial rent, special property. 00:15:15.600 --> 00:15:16.399 Yeah, crazy. 00:15:16.399 --> 00:15:20.480 What can I do with that $130,000 a year, right? 00:15:20.480 --> 00:15:21.919 What else could I do? 00:15:21.919 --> 00:15:26.720 And so this is where let's look at I've got some clients that they're an electrician, right? 00:15:26.720 --> 00:15:30.559 They've just bought commercial property, commercial warehouse, right, in Erina. 00:15:30.559 --> 00:15:35.519 And they have saved themselves on rent, created an investment plan, they're still paying market rent. 00:15:35.519 --> 00:15:36.320 So this is the thing. 00:15:36.320 --> 00:15:37.120 But to themselves. 00:15:37.120 --> 00:15:38.480 Right. 00:15:38.480 --> 00:15:43.600 And so they've they geared up on their property and they did it L L RBA to their SMSF. 00:15:43.600 --> 00:15:47.919 Yeah, and they did this, and they borrowed it 55%, I think, from memory. 00:15:48.240 --> 00:15:49.519 Yep, L VR, yeah. 00:15:49.679 --> 00:15:52.399 Yep, and it and it's a it's an amazing structure for them. 00:15:52.639 --> 00:16:04.559 It really is because once you actually make contribution up to your you know, annual contribution cap, you can actually help pay off that loan whilst getting tax deduction on the contribution. 00:16:04.879 --> 00:16:05.840 So it's a win-win. 00:16:05.840 --> 00:16:13.840 So that works on an owner, owner-occupied, and I'm needing to be careful about using the word owner-occupied, but essentially your business is renting it from the front. 00:16:14.000 --> 00:16:15.360 And then I think that's the best setup. 00:16:15.600 --> 00:16:15.840 Right. 00:16:15.840 --> 00:16:21.200 The the the risk that you play in if you were to just go buy an investment property, the commercial property anywhere, right? 00:16:21.200 --> 00:16:23.360 Who's going, you're gonna have tenancy risk? 00:16:23.360 --> 00:16:25.360 Yes, that that's vacancy risk. 00:16:25.360 --> 00:16:28.399 Yeah, commercial property isn't the same as residential property, right? 00:16:28.399 --> 00:16:31.440 So you've got to factor that into your strategy. 00:16:31.440 --> 00:16:42.080 Do I have enough in my member contributions and and in my available cash position in the SMSF to be able to suffice a tenant moving out if you're gonna go down that strategy? 00:16:42.080 --> 00:16:47.279 And that is why having your strategy down pat before you go out shopping is so, so important. 00:16:47.279 --> 00:16:49.840 That involves your accountant, your financial target. 00:16:49.840 --> 00:16:50.240 Absolutely. 00:16:50.240 --> 00:16:53.440 Your legal planning and a broker's decision. 00:16:53.440 --> 00:16:54.000 Honestly. 00:16:54.159 --> 00:16:54.480 Yeah. 00:16:54.480 --> 00:16:58.799 And there's always another way to invest in property, like commercial property. 00:16:58.799 --> 00:17:07.200 If you don't actually want to borrow MSF or, you know, have the cash out from the member to lend back to the SMSF. 00:17:07.200 --> 00:17:16.799 You can also, like we've we've done this, Luke, um a few times, where I establish a unit trust to purchase a commercial property. 00:17:16.799 --> 00:17:22.640 And then, you know, the investors within the unit trust structure is the SMSF. 00:17:22.640 --> 00:17:42.799 It can inject a certain amount of balance in there, and then the member themselves also have another investor who come in and or two SMSF um inject cash into the unit trust to start the initial purchasing process and then So in layman's terms, you've got a you've got a vehicle, a unit trust up the top. 00:17:42.799 --> 00:17:43.039 Yeah. 00:17:43.200 --> 00:17:46.000 And underneath it, you've got an SMSF or two SMSFs. 00:17:46.079 --> 00:17:46.319 Yeah. 00:17:46.400 --> 00:17:48.720 Um, and the unit trust is the one that's buying. 00:17:48.960 --> 00:17:49.200 Yes. 00:17:49.200 --> 00:17:50.720 And then it borrows the rest. 00:17:50.720 --> 00:17:51.119 Yeah. 00:17:51.440 --> 00:17:56.000 So that's so that's not under the SMSF rulings for from a League 40. 00:17:56.000 --> 00:17:56.880 That's right. 00:17:56.880 --> 00:18:02.079 Um some lenders, as soon as they see an SMSF is involved from a beneficiary or a unit. 00:18:02.079 --> 00:18:04.160 They have a problem with it, they start having a problem with it. 00:18:04.160 --> 00:18:11.039 There are some lenders that will still do it, but you need to do pretty much a round table with that lender to make sure that it works. 00:18:11.039 --> 00:18:11.440 Yeah. 00:18:11.440 --> 00:18:13.759 So we've just done that recently with a couple of cops. 00:18:13.759 --> 00:18:14.240 Yeah, okay. 00:18:14.240 --> 00:18:14.799 And it worked. 00:18:14.960 --> 00:18:15.119 Yeah. 00:18:15.119 --> 00:18:15.440 Awesome. 00:18:15.519 --> 00:18:17.440 So did it, and there's a couple of other people. 00:18:17.519 --> 00:18:21.680 Is there like a restriction in terms of lending to the unit trust? 00:18:21.680 --> 00:18:24.000 Are they like as much restriction? 00:18:24.319 --> 00:18:25.039 No, not at all. 00:18:25.039 --> 00:18:27.599 So it's still deemed as a as a commercial borrower. 00:18:27.599 --> 00:18:31.119 So if you're buying

residential, is that what you're talking about? 00:18:31.359 --> 00:18:33.519 Well, you can, yeah. 00:18:33.519 --> 00:18:35.680 That's just another strategy or together. 00:18:37.119 --> 00:18:41.920 If you're going down the path of buying commercial, it is going to be deemed as a business loan and all that sort of stuff. 00:18:41.920 --> 00:18:42.319 Yes. 00:18:42.319 --> 00:19:01.680 And if it processed to normal hug lending, if you're going down the path of a unit trust, and it's not talking about the beneficiaries and unit holders right now, but if the unit trust is buying a um a residential property, there are only there are only certain lenders will let you lend to that to that structure because they don't want to just keep people setting up unit trusts, you know, separate. 00:19:02.079 --> 00:19:11.359 Yeah, especially now they're trying to do that to get around the negative gearing because they can still do that if they inject cash into the unit trust to purchase at a push. 00:19:11.359 --> 00:19:12.799 The residential property, yeah. 00:19:13.200 --> 00:19:13.519 Exactly. 00:19:13.519 --> 00:19:17.039 There's a few TikTokers and social media influencers that are pushing that avenue. 00:19:17.200 --> 00:19:17.359 Yeah. 00:19:17.440 --> 00:19:18.720 Um, but you just got to be careful of that. 00:19:18.720 --> 00:19:19.599 That yeah, that's all I like. 00:19:19.839 --> 00:19:26.000 But there's like there's there's opportunities to still set up a unit trust and then acquired lending. 00:19:26.000 --> 00:19:26.319 Yep. 00:19:26.319 --> 00:19:26.720 Yeah. 00:19:26.720 --> 00:19:27.759 In the normal channel. 00:19:27.759 --> 00:19:28.079 Yep. 00:19:28.079 --> 00:19:28.480 Yeah. 00:19:28.480 --> 00:19:29.279 Perfect. 00:19:29.279 --> 00:19:30.319 That's really good. 00:19:30.319 --> 00:19:31.279 Thank you for that. 00:19:31.279 --> 00:19:42.880 The what are the top three SMSF lending mistakes and assumptions that you've seen for you know the past five years when when things are changing? 00:19:43.119 --> 00:19:47.359 Yeah, so the the top three that I've seen from a lending mistake. 00:19:47.359 --> 00:19:51.759 So I'm not gonna, I'm not a professional or specialist in the accounting and things. 00:19:51.759 --> 00:19:52.400 Yeah, that's okay. 00:19:52.400 --> 00:19:54.160 I'm just gonna talk about lending. 00:19:54.160 --> 00:19:59.440 The biggest one, and it's happened a couple of times, is I've bought the property, can we now do the finance? 00:19:59.440 --> 00:20:00.880 Bum bum, don't do that. 00:20:00.880 --> 00:20:10.160 Do not so buy the property before working out the finance and the structure is a massive mistake because people fall in love with the property, they start putting deposits down and all that sort of thing. 00:20:10.799 --> 00:20:13.839 Emotionally involve themselves into that decision, yeah. 00:20:14.160 --> 00:20:20.480 So before you exchange, you ideally want a clarity of clarity around does it qualify for the from a security point of view? 00:20:20.480 --> 00:20:25.359 Does it work with particular lenders, the purchasing entity, bear trust? 00:20:25.359 --> 00:20:30.400 I'm not even gonna go into double stamp duty, but sign the contract before the all that sort of stuff, right? 00:20:30.400 --> 00:20:32.079 So there's there's some really clear things there. 00:20:32.079 --> 00:20:36.640 So don't sign a contract and then ring your accountant lawyer and broker and asking, now make it work. 00:20:36.640 --> 00:20:37.279 You can't do that. 00:20:37.279 --> 00:20:37.759 No. 00:20:37.759 --> 00:20:39.440 So the planning is key. 00:20:39.440 --> 00:20:40.000 100%. 00:20:40.000 --> 00:20:44.160 The second one is underestimating how much um cash is actually needed. 00:20:44.160 --> 00:20:49.759 So someone hears 75% loan to value ratio and thinks, yep, great, I only need 25%. 00:20:49.759 --> 00:21:04.079 Potentially, there is different equity requirements, stamp duty, legal costs, valuation, lending costs, setting up the SMSF and the holding trust, you know, those those establishment costs, setting up the trustee, getting all those things vetted. 00:21:04.079 --> 00:21:09.519 So then also potentially settlement or lender liquidity requirements post-settlement. 00:21:09.519 --> 00:21:11.599 So it's not just 25%, right? 00:21:11.599 --> 00:21:13.680 So that's that's another big mistake that I'm seeing. 00:21:13.680 --> 00:21:17.599 People get a little bit shocked when they go, Oh, how much is this actually costing? 00:21:18.000 --> 00:21:18.640 Yeah, that's right. 00:21:18.640 --> 00:21:20.480 And then they'll they'll be short. 00:21:20.960 --> 00:21:21.200 Yeah. 00:21:21.200 --> 00:21:25.599 And the and the third one is assuming that every lender assesses the same way. 00:21:25.599 --> 00:21:32.880 So in residential lending, it's pretty much a the same, just lenders have little specific niches that they play around in. 00:21:32.880 --> 00:21:43.680 It is um they no two lenders arrive at it um at the same borrowing capabilities um based on exactly the same apples for apples. 00:21:43.680 --> 00:21:44.400 They just don't do it. 00:21:44.400 --> 00:21:49.359 Yeah, differences include the maximum L VR they do, the shading of the rental income. 00:21:49.359 --> 00:21:53.680 Some will shade it at 70%, some will shade it at 80% of what. 00:21:53.680 --> 00:21:58.640 So if you're earning $100,000 a year, that some will only take $70,000 in rent, $80,000 in rent. 00:21:58.640 --> 00:22:06.240 Your contribution root um treatment, so how much you're contributing um as a minimum from a wage point of view or voluntary. 00:22:06.400 --> 00:22:06.640 Yeah. 00:22:06.799 --> 00:22:11.440 Your liquidity, some actually have minimum loan size, some actually have minimum maximum loan size. 00:22:11.440 --> 00:22:14.640 So some actually won't borrow any or lend any more than two million dollars. 00:22:14.640 --> 00:22:14.880 Right. 00:22:14.880 --> 00:22:17.359 Some will borrow, you know,

lend more than that. 00:22:17.359 --> 00:22:20.160 Some won't do play in the space until you hit $500,000. 00:22:20.400 --> 00:22:22.960 So there's a there's a a lot of restrictions. 00:22:22.960 --> 00:22:23.599 Yeah. 00:22:23.599 --> 00:22:32.640 So it's so important, yeah, so to speak to your broker beforehand and just making sure that your broker knows what what are they doing. 00:22:32.640 --> 00:22:34.640 It's really quite important as well. 00:22:34.880 --> 00:22:35.759 I just wing it. 00:22:35.759 --> 00:22:37.440 No, look, it's you do it. 00:22:37.440 --> 00:22:41.920 It is it is honestly, and there's a mortgage brokers that don't play in the space because of this. 00:22:41.920 --> 00:22:42.400 Yeah. 00:22:42.400 --> 00:22:44.319 The other you've asked me for three. 00:22:44.319 --> 00:22:46.079 I've just given you three, but can I just add one more? 00:22:46.079 --> 00:22:47.200 Yeah, for sure. 00:22:47.200 --> 00:22:50.000 The biggest the other thing is the time frame. 00:22:50.000 --> 00:22:53.599 SMSF lending is not going to get done in a week. 00:22:53.599 --> 00:22:59.039 No, is the the structures, seed vetting of of the the the SMSF line. 00:22:59.279 --> 00:23:05.200 Not just the whole structure itself, it takes like uh like four to six weeks just to set up. 00:23:05.599 --> 00:23:06.559 I'm doing one at the moment. 00:23:06.559 --> 00:23:10.400 We set it up, set up the lending positioning maybe five weeks ago. 00:23:10.400 --> 00:23:13.039 We're still not uh not there yet. 00:23:13.039 --> 00:23:14.319 Still not at approval yet. 00:23:14.400 --> 00:23:14.559 Yeah. 00:23:14.720 --> 00:23:17.759 Some lenders are sitting at three weeks, turning time. 00:23:17.759 --> 00:23:25.920 So if you want to put a you know your name on a property and it's got a cooling off period and you've only got 10 days, this is why you need to have it all done beforehand. 00:23:25.920 --> 00:23:26.240 Yeah. 00:23:26.240 --> 00:23:29.599 If you're seriously thinking about doing this as a strategy, do it early. 00:23:29.599 --> 00:23:33.119 The structuring and the conversations with your specialist advisors. 00:23:33.519 --> 00:23:37.519 And it helps to have all your professionals in one room as well. 00:23:37.519 --> 00:23:52.799 Or just, you know, if you consider getting advice from an advisor, like accountant, your financial planner who don't really have a mortgage broker in-house like we do, you need to actually make sure that they talk to each other. 00:23:53.039 --> 00:23:53.440 100%. 00:23:53.440 --> 00:23:53.920 Yeah. 00:23:53.920 --> 00:23:56.799 There's so many little things that can be missed. 00:23:56.799 --> 00:23:59.759 Um, and it could be where are those contributions coming from? 00:23:59.759 --> 00:24:00.000 Yeah. 00:24:00.000 --> 00:24:01.519 Where's the cash coming from? 00:24:01.519 --> 00:24:04.160 You know, what is the tax considerations here? 00:24:04.160 --> 00:24:06.640 You know, what is our timeframe for setting up the bear trust? 00:24:06.640 --> 00:24:09.279 What is this, you know, it's all that sort of stuff comes into play. 00:24:09.440 --> 00:24:09.599 Yeah. 00:24:09.599 --> 00:24:10.640 No, thank you, Luke. 00:24:10.640 --> 00:24:14.000 So I'll bring this, you know, episode to a close. 00:24:14.000 --> 00:24:23.599 And so if you're considering purchasing property through the SMSF, and what would be your advice to those clients, listeners? 00:24:24.000 --> 00:24:27.680 Have your professionals and your and your advisors in your corner early. 00:24:27.680 --> 00:24:28.640 Yeah, definitely. 00:24:28.640 --> 00:24:35.119 That's that's primarily, you know, we we can spitball numbers, you know, and if it does work, it does work. 00:24:35.119 --> 00:24:42.960 But it's better to know that before and say falling in love with properties or under you know, going, yep, my business can then rent this property. 00:24:42.960 --> 00:24:44.000 It's all that sort of stuff. 00:24:44.000 --> 00:24:45.839 Just stop, let's let's check it out. 00:24:46.079 --> 00:24:48.240 Yeah, stop, breathe, and get advice. 00:24:48.240 --> 00:24:51.359 So thank you so much, Luke, for your time today. 00:24:51.680 --> 00:24:52.160 No worries. 00:24:52.480 --> 00:24:55.039 You know, great insight to the lending world. 00:24:57.920 --> 00:24:58.720 No, it's great. 00:24:58.720 --> 00:24:59.599 Thanks, Luke. 00:24:59.599 --> 00:25:00.400 Thanks, Mike. 00:25:00.799 --> 00:25:05.119 And that concludes another edition of My Accounting Advantage. 00:25:05.119 --> 00:25:06.880 See you next week.