The Difference Between Residential and Commercial SMSF Loans

There are millions of SMSF loans in Australia today, and it’s no wonder why. SMSF loans are great for small businesses, they can help lower fees, and can also increase your superannuation fund. Before committing to an SMSF loan, find out first if you are better suited for a commercial or residential loan.

SMSF Commercial Loans

If you use an SMSF to rent a commercial property, this can be beneficial to you and your business in the long run. You have the option to then rent the property itself, which means you can invest that money if a member of your SMSF fund helps to run the business. This can help with your cash inflow and outflow when done properly and can maximize your financial gains in a long-term sense.

You or a member also have the option to borrow some of the funds for commercial property purchased, but it is important to note that the purchased property is available only to the SMSF fund, so you would not be able to buy residential property and rent it out. SMSF loans are a great way to help run and further fund a business. With an SMSF commercial loan:

• It can be used to purchase traditional or specialised securities
• The property itself can be leased out to a business in a related field
• A commercial loan cannot be used for construction purposes
• Your loan to value ratio can be up to 75%

Commercial loans are ideal for business owners that are looking to further grow their wealth.

SMSF Residential Loans

Residential property loans are not as popular as commercial loans, mainly because there are a lot of hidden items surrounding a residential loan and you want to be sure you’ve followed everything closely and correctly. Residential loans are different in that:

• They can be used to purchases, apartments, houses, and townhouses
• They cannot be used for vacant land or to build a house
• Interest rates can be up to 1% higher than a traditional residential loan
• Your loan to value ratio can be up to 80%

Buying property with your super can give you great tax benefits, but it’s important that you go through the right channels to help you, your property, and your business thrive. Be sure to look at both residential and commercial loans to find what is right for you.