SMSF commercial property loans with the bare trust in place first.
A fund buying business real property under a limited recourse borrowing arrangement.
- Facility
- $200K - $5M
- Term
- 6 - 60 months
- Recourse
- Limited to the asset
- Security
- Business real property
Structure first. Contract second.
Most deals start with the property. A commercial SMSF property loan starts with the structure, and the structure has to exist before the contract does.
Holding trust executed and its corporate trustee registered before exchange, with that trustee named as purchaser on the contract. Get that order wrong and you are not repricing the deal, you are rebuilding it - so send us the diagram early and we will tell you whether it holds before anyone spends money on it.
We write a commercial property SMSF loan to 70% of assessed value on business real property, from $200K to $5M over 6 to 60 months, interest only or prepaid, under a limited recourse borrowing arrangement. Rates start at 9.95% p.a. and are set per deal, which is what the next section is about.
Send it like this
A few sentences gets you terms.
A light touch to submit, and no accreditation to clear first. Security, number, dates, exit - that is the whole submission. Below is one written for this scenario.
- To
- deals@alphaconcapital.com.au
- Subject
- SMSF commercial property - indicative terms?
Fund is buying the premises the client's business trades from - 24 Sample Road, Example VIC 3000 - at $1.4M, exchange in two weeks. Holding trust deed executed and its corporate trustee registered last week, both deeds attached. Deposit funded by a rollover already in the fund. Exit is a refinance to a long-term SMSF lender: the fund is buying to hold, not to sell.
How credit structures it
What sets SMSF commercial property loan interest rates.
Priced per deal, from 9.95% p.a.
There is no board rate for a commercial SMSF property loan. The rate follows the property, the LVR and how the fund gets off the facility, so a clean metro premises at 60% prices differently to a specialised asset at 70%.
The holding trust comes first
Holding trust deed executed and its corporate trustee registered before exchange, with that company named as purchaser on the contract. Done in the other order, the file starts again.
Both deeds read before the offer
Power to borrow, power to acquire, one acquirable asset. Send the fund deed and the bare trust deed at submission and the offer reflects what they actually allow.
Independent advice, built into the date
Every guarantor, and every director signing for a trustee, takes their own advice first. It is not a formality and it is not quick - put it in the settlement timetable at the start.
SMSF commercial property loan LVR and credit parameters
- Facility
- $200K - $5M
- Max LVR
- 70%
- Rate
- From 9.95% p.a.
- Term
- 6 - 60 months
- Interest
- Prepaid or interest only
- Security
- 1st mortgage, bare trustee
- Recourse
- Limited to the asset
- Structure
- Bare trust before exchange
- Borrower
- Complying fund, active ABN
The SMSF commercial property loan LVR caps at 70% of our assessed value rather than the contract price, and the fund covers the rest - deposit at exchange, balance and acquisition costs at settlement. Check a scenario with the LVR calculator. SMSF commercial property loan interest rates start at 9.95% p.a. and are quoted per deal, not off a board rate.
Indicative. Subject to credit assessment, a panel valuation and satisfactory security.
Send this
What kills it
- The fund's trust deed and the bare trust deed, certified and current
- The contract of sale, with the bare trustee named as purchaser
- The fund's complying status, its ABN and its trustee details
- Member details, and the contribution or rollover funding the deposit
A bare trust set up after exchange
Check it before anything else. If it did not exist at exchange we cannot fund the purchase as an LRBA, and unpicking that is a conveyancing problem rather than a credit one.
A deed that does not permit borrowing
Older fund deeds were written before LRBAs existed. A variation at submission is routine. A variation discovered at legals is not.
More than one acquirable asset
One arrangement, one acquirable asset. Two titles that are not a single object need two arrangements, and two sets of costs.
That is the whole file. Send it and we will come back with a position.
Broker questions
SMSF commercial property loans, answered.
What are SMSF commercial property loan interest rates?
SMSF commercial property loan interest rates start at 9.95% p.a. here, quoted per deal rather than off a board rate. Three things move them: the property itself, the LVR the fund is borrowing to, and how the fund gets off the facility at the end of the term. A clean metro premises at 60% prices differently to a specialised asset at 70%. An establishment fee, a monthly loan management fee, a risk fee and the valuation sit on top, and so do legal costs, which run higher on an SMSF file than a standard one because of the deed review and the independent advice. The product guide carries the fee schedule, and the term sheet carries the total so you are not adding it up yourself.
What LVR can an SMSF borrow to on commercial property?
To 70%, struck on our assessed value rather than the contract price - where a valuation lands under the price, the fund covers that gap as well. Budget 30% at minimum plus acquisition costs, from a contribution, a rollover or cash already in the fund: deposit at exchange, the balance at settlement. Show us the source at submission, and check the numbers with the LVR calculator. Seventy is a ceiling rather than a starting point, and our recourse against the fund is the acquired asset alone - which is part of why the cap sits where it does.
How big can an SMSF loan for commercial property be?
A commercial SMSF property loan here runs from $200K to $5M, over 6 to 60 months, on a first registered mortgage in the bare trustee's name. One limited recourse borrowing arrangement covers one acquirable asset, so a fund buying two titles that are not a single object needs two arrangements and carries two sets of costs.
How does the fund repay the loan?
The facility is interest only. The fund pays that monthly, or prepays it at settlement. The principal is repaid inside the term, one of two ways: a refinance to a long-term SMSF lender, or a paydown from contributions and rollovers. The fund is buying to hold, so a sale of the property should not be the plan, and rarely is. Tell us at submission which of the two you are working towards - it is one of the three things that set the rate.
What counts as business real property?
Real property used wholly and exclusively in one or more businesses - a warehouse, a workshop, a showroom, a suburban office, a shop. What the property is used for matters more than who uses it: a fund can hold business real property leased to a member's own business on arm's length terms, which is why so many funds buy the premises their client trades from, and it can just as easily hold premises leased to an unrelated tenant. Vacant land, anything residential, and a mixed-use site with a residence attached are the ones to raise with us before a contract is written. Whether a given property qualifies is a question for the fund's adviser. Whether we will lend against it is ours.
Do you lend to SMSFs on residential property?
No. We fund business real property for commercial and investment purposes only, never investment in residential property. A commercial property SMSF loan is the only shape we write in this space.
What is a limited recourse borrowing arrangement (LRBA)?
It is the structure the superannuation rules require when a fund borrows to buy property, and every SMSF loan we write uses one. The property is bought and held by a separate trustee on a holding trust - the bare trust - rather than by the fund itself. The fund makes the repayments and takes the income and the growth, and has the right to call for legal title once the loan is repaid. One arrangement covers one acquirable asset, and recourse against the fund is limited to that asset alone: no other fund asset is exposed if the arrangement fails, which is where the name comes from. Whether an LRBA suits a particular fund is a question for its own adviser; ours is whether the arrangement in front of us is one we can lend into.
Is the loan limited recourse?
Yes. Our rights against the fund are limited to the acquired asset, so no other fund asset is exposed if the arrangement fails. We may still take personal guarantees from members or from the directors of the corporate trustee, and that is permitted: what the arrangement limits is recourse to the fund itself, including a guarantor's right to be indemnified out of it. A guarantor is therefore exposed personally, and each one should take their own advice on that before signing.
How long does an SMSF file take?
Longer than a bridge, and the structure is the reason. Deed review and independent advice are the two steps that stretch a timetable, and both can start the day you submit. Start them late and they will set the settlement date for you.
Can the fund refinance an existing LRBA to Alphacon?
Yes, where the arrangement is compliant and the security is business real property. Send both deeds and the incumbent's payout figure with the submission.
Your deal deserves a decision-maker.
Security, the number, the dates and the exit - that is the whole submission. A light touch to send it, no call centres, a straight answer the same day.