SMSF Loans and How to Purchase a Storage Facility

Understanding SMSF Loans for Storage Facilities

As a pharmacy assistant, you might be surprised to learn that your self managed super fund can be used to purchase commercial property, including storage facilities. SMSF commercial property investments have become an increasingly popular retirement property strategy for Australians looking to build retirement savings through tax effective investment opportunities.

A storage facility can be an attractive investment property option for your super fund. These properties often provide consistent rental income with relatively low maintenance requirements compared to residential properties. When you buy property with super, you're taking control of your retirement savings in a way that can provide both income and capital growth over time.

What is a Limited Recourse Borrowing Arrangement?

To purchase a storage facility using your SMSF, you'll need to establish a Limited Recourse Borrowing Arrangement (LRBA). This structure allows your super fund borrowing to be quarantined, meaning if something goes wrong with the investment, the lender can only claim against the property itself, not your other SMSF assets.

Under an LRBA, your SMSF property loan operates differently to standard commercial loans. The property is held in a separate trust until the loan amount is fully repaid. This arrangement provides an extra layer of protection for your retirement savings while allowing you to leverage your superannuation to build wealth.

SMSF Deposit Requirements and LVR

When applying for an SMSF commercial loan to purchase a storage facility, you'll need to meet specific requirements:

• Deposit 20% to 25%: Most SMSF approved lenders require a minimum deposit of 20% to 25% of the property value
• SMSF LVR: The loan to value ratio is typically capped at 75-80% for commercial properties
• Corporate trustee: You'll need a corporate trustee structure for your SMSF
• SMSF compliance: Your investment must comply with SMSF rules and SMSF property rules

Principal and Interest vs Interest Only SMSF Loans

When structuring your SMSF property loan, you'll need to choose between principal and interest SMSF repayments or interest only SMSF arrangements.

Principal and Interest SMSF: This option reduces your loan amount over time through regular repayments. It's suitable if your SMSF has consistent income from rental payments and other sources to cover higher repayments.

Interest Only SMSF: With this structure, you only pay the interest rate component for a set period, typically 1-5 years. This keeps SMSF repayments lower initially, which can be helpful if you're relying on rental income from the storage facility to service the loan.

Some lenders also offer an SMSF offset account, which can help reduce the interest you pay while maintaining flexibility with your super fund's cash flow.

SMSF Tax Benefits of Storage Facilities

One of the key advantages of using super to buy an investment property is the favourable tax treatment:

• Rental income received by your SMSF is taxed at 15%, which is significantly lower than most personal income tax rates
• Capital gains on properties held for more than 12 months are taxed at just 10% (tax at 15% with a one-third discount)
• When your SMSF enters pension phase, investment income and capital gains may be tax-free

These SMSF tax benefits can make a storage facility particularly attractive as part of your SMSF investment strategy. The consistent rental income taxed at these concessional rates can accelerate your wealth building over time.

The SMSF Loan Application Process

Securing an SMSF Mortgage for a storage facility involves several steps:

1. Review your SMSF investment strategy: Ensure a storage facility aligns with your fund's objectives
2. Establish the correct trust structure: Set up the LRBA with a corporate trustee
3. Find a suitable property: Identify a storage facility that meets SMSF compliance requirements
4. Prepare documentation: Gather SMSF Bank statements, trust deeds, and financial records
5. Submit your SMSF loan application: Work with SMSF specialist lenders who understand these complex arrangements
6. Settlement: Budget for SMSF settlement costs including legal fees and stamp duty

Working with brokers who can access SMSF Loan options from banks and lenders across Australia is crucial. Not all lenders offer SMSF commercial loans, so having access to multiple SMSF approved lenders increases your chances of securing competitive SMSF loan rates.

SMSF Loan Fees and Ongoing Costs

When budgeting for your storage facility purchase, consider these costs:

• SMSF loan fees (application fees, valuation fees, legal fees)
• Ongoing SMSF administration costs
• Property management fees
• Building insurance and maintenance
• Annual SMSF compliance and audit fees

These costs should be factored into your cash flow projections to ensure your SMSF can comfortably service the loan while maintaining retirement security.

SMSF Refinance Opportunities

As your SMSF grows in value or loan rates change, you may consider an SMSF refinance. This can help you:

• Secure a lower interest rate
• Access equity for additional investments
• Consolidate multiple SMSF loans
• Switch from interest only to principal and interest SMSF repayments

Refinancing your SMSF property loan should be evaluated regularly to ensure you're maintaining the most suitable structure for your retirement goals.

Is a Storage Facility Right for Your SMSF?

A storage facility can be an excellent addition to your SMSF investment strategy if:

• You want exposure to SMSF commercial property rather than SMSF residential property
• You're seeking consistent rental income with lower tenant management requirements
• Your SMSF has sufficient funds to meet the deposit requirements and ongoing costs
• The investment aligns with your overall retirement property strategy

Pharmacy assistants often have stable employment and regular superannuation contributions, making them well-positioned to consider this type of superannuation loan arrangement. By purchasing an investment property through your SMSF, you're taking an active role in building your financial future.

At Pharmacist Home Loans, we understand the unique financial circumstances of pharmacy professionals. While we specialise in home loans for pharmacists, we also help pharmacy assistants explore various investment opportunities, including SMSF Loans for commercial properties.

Whether you're considering a storage facility investment or looking at buying your first investment property, having expert guidance through the SMSF borrowing process is invaluable. Our team can help you understand the complexities of self managed super fund loans and connect you with SMSF specialist lenders who offer suitable loan products.

For pharmacy assistants interested in expanding your property portfolio through superannuation, now is an excellent time to explore your options. If you have questions about how SMSF residential loans or SMSF commercial loans might fit into your retirement planning, we're here to help.

Call one of our team or book an appointment at a time that works for you to discuss your SMSF property loan options and start building your path to retirement security.