SMSF: How we helped Jonathan secure 80% funding for his SMSF Investment property

For seasoned investors, the process of purchasing an investment property through a Self-Managed Super Fund (SMSF) can be both highly rewarding and complex. While the potential for financial capital gains is there, navigating the intricacies of SMSF borrowing requires expert advice and strategic planning.

In early 2024, Jonathan, an experienced property investor, sought the expertise of Zenith to assist him in acquiring a new investment property through his SMSF. Jonathan’s goal was to secure 80% funding for the purchase, and with our guidance, he was able to make a successful acquisition. This case study explores how we helped Jonathan achieve his investment goals and maximise his borrowing capacity.

The Challenge

Jonathan is a highly sophisticated investor with an extensive portfolio of both residential and commercial properties. He had already made considerable wealth through his investments and was looking to expand his SMSF portfolio with the purchase of a high-yield investment property.

While Jonathan was experienced in property investing, financing an SMSF property presents unique challenges:

• Complex Lending Criteria: Banks are more cautious when lending to SMSFs, with specific criteria for funding through a superannuation fund, including strict asset and liability assessments.
• 80% Loan-to-Value Ratio (LVR) Goal: Jonathan aimed to secure 80% LVR funding, which, while achievable, required careful structuring and expert advice to meet lender requirements.
• Tax Efficiency: Given the nature of SMSF investments, Jonathan was focused on ensuring the transaction was structured in a way that maximised tax efficiency while aligning with superannuation regulations.

Despite these challenges, Jonathan had a clear vision for his SMSF and was determined to achieve the best financing terms possible. He turned to Zenith for expert advice and support in navigating the complexities of SMSF borrowing.

Our Approach

At Zenith, we specialise in advising sophisticated investors on SMSF property purchases, ensuring they can meet both their financial and compliance goals. Our initial steps in working with Jonathan involved a comprehensive review of his SMSF and personal financial position:

1. Reviewing SMSF Documentation
   We conducted an in-depth analysis of Jonathan’s SMSF to ensure it was set up correctly and fully compliant with the relevant superannuation laws. This included reviewing the trust deed, the investment strategy, and the fund’s financial statements.
2. Assessing Borrowing Capacity
   We worked closely with Jonathan to determine the maximum borrowing capacity available within his SMSF. Unlike traditional property loans, SMSF loans are subject to specific restrictions on borrowing capacity, including limitations on the types of properties that can be purchased and the structure of the loan.
3. Optimising the Loan Structure
   To secure 80% funding, we needed to ensure the loan was structured correctly. We referred Jonathan to our trusted financial advisor to advise on the appropriate structure and ensured it was suitable to borrow for property acquisitions.
4. Lender Selection and Negotiation
   Securing 80% funding required careful selection of the right lender. We presented Jonathan with options from various lenders, taking into account his SMSF’s structure, the property’s location, and Jonathan’s broader investment strategy. We helped negotiate favourable loan terms that allowed for the 80% LVR, ensuring that the interest rates and fees were competitive and aligned with his long-term investment goals.

The Process

Once Jonathan had agreed on the best financing structure, we began the loan application process. We worked closely with his accountant to ensure all documentation were in order, including:

• Superannuation Fund Deeds and compliance declarations.
• Tax Returns and Financial Statements for both Jonathan’s SMSF and personal finances.
• Property Details and Valuation Reports, which we coordinated with the lender’s valuer to ensure the loan-to-value ratio was within acceptable limits for the bank.

As the application progressed, we continued to liaise with the lender, ensuring they had all the necessary information for a smooth approval process. Jonathan also received regular updates from our team, helping him stay informed throughout the journey.

The Outcome

Thanks to the expert advice and strategic planning provided by Zenith, Jonathan successfully secured the 80% funding he needed to purchase the investment property through his SMSF. Not only did he secure a competitive interest rate and favourable loan terms, but he also ensured the transaction was structured in a tax-efficient manner that aligned with superannuation regulations.

With the new property now added to his SMSF portfolio, Jonathan was able to further diversify his investment strategy, boosting both the performance of his superannuation fund and his long-term wealth-building potential.

Why Expert Advice Matters

This case highlights the importance of working with experts when looking to make a property purchase through an SMSF. Zenith provides tailored advice and support to sophisticated investors like Jonathan, ensuring they can secure optimal financing and structure their investments for maximum return and compliance.

If you are an investor looking to purchase a property through your SMSF, get in touch with us at Zenith for expert guidance on securing the best financing options available. We specialise in helping clients navigate the complexities of SMSF borrowing to achieve their investment goals.