Why should you consider SMSF Loans for mixed-use property?

As a Tasmanian Government employee, you've worked hard to build your superannuation balance. Now you're wondering if you can use those funds to purchase a mixed-use property through your Self-Managed Super Fund (SMSF). The good news is that SMSF Loans can open doors to property investment opportunities that might otherwise be out of reach.

What is a mixed-use property?

A mixed-use property combines residential and commercial elements under one roof. Think of a building with shops or offices on the ground floor and apartments above, or a property where you might run a business from part of the premises while using another section for residential purposes. These properties can offer multiple income streams through rental payments from both residential tenants and commercial occupants.

Understanding SMSF Loan options for mixed-use properties

When you access SMSF Loan options from banks and lenders across Australia, you'll find that mixed-use properties require special consideration. Most lenders classify these as non-specialised commercial property, which affects both the interest rate and loan to value ratio (LVR) you can achieve.

Typically, you can expect:

• Maximum LVR of 70% for mixed-use properties
• Higher interest rates compared to standard residential investment property loans
• More stringent assessment criteria
• Additional documentation requirements

The application process for SMSF mixed-use property loans

Applying for a SMSF Loan involves a more detailed application process than standard home loans. When buying an investment property through your SMSF, you'll need to provide several documents:

1. SMSF documentation:

   • Certified copy of the SMSF Trust Deed
   • Certified copy of the Custodian Trust Deed (if applicable)
   • SMSF financial statements
   • SMSF Bank statements

2. Property documentation:

   • Copy of contract of sale
   • Property valuation
   • Rental appraisals for both residential and commercial components

3. Personal documentation:

   • Your personal bank statements
   • Evidence of your financial situation as a trustee

Interest rate considerations

SMSF Loan Interest Rate structures for mixed-use properties typically fall into two categories:

Variable interest rate: Your rate fluctuates with market conditions. While this means your repayments can increase, you might benefit when rates fall. Some lenders offer interest rate discounts for public servants, which could help reduce your overall borrowing costs.

Fixed interest rate: Lock in your rate for a set period, providing certainty for calculating SMSF Loan repayments. This can be particularly valuable for mixed-use properties where rental income might vary between commercial and residential tenants.

Assessing your borrowing capacity

Your borrowing capacity for an SMSF Mortgage depends on several factors:

• Your SMSF's current balance and cash flow
• Projected rental income from both residential and commercial components
• Your personal financial situation (as you're personally guaranteeing the loan)
• The property's location and condition
• Current property market conditions

Lenders will scrutinise the commercial viability of mixed-use properties more closely than standard residential investments. They'll want to see evidence that both components can generate sustainable rental returns.

Potential benefits for your investment property portfolio

Using super to buy an investment property can offer several advantages:

Diversified income streams: Mixed-use properties can provide rental income from multiple sources, potentially offering more stability than single-use properties.

Capital gains potential: Properties in well-located mixed-use developments often experience solid capital growth over time.

Tax advantages: Rental income and capital gains within your SMSF are generally taxed at concessional rates.

Important restrictions and considerations

Restrictions apply when using SMSF Loans for property investment:

• You cannot live in or personally use any part of the property
• The property must be purchased through a bare trust arrangement
• You cannot make improvements to the property until the loan is fully repaid
• Stamp duty and other purchase costs must be paid from SMSF funds

For Tasmanian Government employees considering expanding your property portfolio, it's worth exploring how SMSF loans might fit alongside other investment loans for public servants. You might also benefit from a loan health check to understand how this strategy aligns with your overall financial goals.

Getting started with your SMSF property investment

If you're ready to explore SMSF Loan options for mixed-use property investment, the first step is understanding your current financial position. Consider getting loan pre-approval to understand your borrowing capacity before you start property hunting.

At Public Home Loans, we understand the unique circumstances of Tasmanian Government employees and can help you access SMSF Loan options from banks and lenders across Australia. Our team specialises in SMSF loans for public servants and can guide you through the streamlined application process.

Mixed-use property investment through your SMSF can be a powerful wealth-building strategy, but it requires careful planning and the right lending partner. Call one of our team or book an appointment at a time that works for you to discuss your SMSF property investment goals and explore your loan options.