SMSF finance

It seems that each month another lender enters the SMSF finance market. There must be some reason for it. I believe the reason has something to do with the enormous growth seen in the market. Perhaps the best explanation of this is the comment below:

‘..one of the real headline grabbers that should be in the eye of the public is the rise of SMSFs and just how property as the new preferred asset class, is guiding average Australians out of the quagmire of the GFC.’

Nic Ellis, CEO of SuperShift, a SMSF property specialist SMH March 24th, 2012.

In 2011 there was $400 billion in the Self Managed Superannuation industry. This represented 32% of the total industry, up from 5% in 1994.

So what is an SMSF?

• it is a small superannuation fund established for 1-4 people with the fund controlled by trustees/directors who are also the members.

 Who benefits from a SMSF?

• members have control, choice and flexibility over how the fund is operated and how funds are invested.
• the fund has a wide range of investment options including property, shares, cash or any other assets that suit the investment objectives of the fund (provided it meets the sole purpose test).
• the SMSF is structured to meet the specific investment needs and strategies of it's members.
• investment gearing opportunities including property loans.

The big change came in September 2007 when the law was changed to enable SMSF's to borrow monies to purchase property providing certain legal criteria were met. This opened the door for people to not only invest in residential property directly but also through their superannuation fund. When the share market went south this focus increased.

From this date more and more funders have shown their hand in this market and Loan to Valuation Ratios (LVR’s) have increased from a mere 72% to a now default standard of 80%. At the same time interest rates have dropped from a loaded rate to the Standard Variable Rate (SVR).

The time is nigh to join the mob. To this end Macquarie Bank have put out a rather detailed book from which you can gain a greater understanding (please see the link to the right).