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6 member unit trust

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phacoboy View Drop Down
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Joined: 16/February/2011
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  Quote phacoboy Quote  Post ReplyReply Direct Link To This Post Topic: 6 member unit trust
    Posted: 16/February/2011 at 20:19
Sorry if this question has been asked before but i am getting some conflicting advice :

6 part 8 unrelated SMSFs want to invest in a new unit trust to buy business real property. Can the Unit trust borrow by mortgaging the property or does it need to finance using an installment warrant ?

gene

rambler1 View Drop Down
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  Quote rambler1 Quote  Post ReplyReply Direct Link To This Post Posted: 17/February/2011 at 02:49
The Smsf can borrow using a non recourse loan,

Non recourse loan is


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Edited by rambler1 - 17/February/2011 at 09:44
Luke 11 46: Woe unto you also, ye lawyers! For you load men with burdens that are difficult to carry, and you yourselves won't even lift one finger to help carry those burdens.

phacoboy View Drop Down
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  Quote phacoboy Quote  Post ReplyReply Direct Link To This Post Posted: 17/February/2011 at 16:07
sorry to be pedantic but in this particular case with 6 SMSFs involved, can the interposed unit trust then borrow with an investment warrant style loan and does this need yet another trust or not ..?

so we would have security trust holding the property for the unit trust, the unitholders of which are the 6 SMSFs ?

gene

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  Quote rambler1 Quote  Post ReplyReply Direct Link To This Post Posted: 17/February/2011 at 18:58
This is how I see it, but Id get some spext advice from the banks who deal in this area as I am not an expert.

1 The borrowers are the SMSF's in their proportion of holding say 1/6, so they borrow from a lender who will lend to all of them and has security over the asset

2 The beneficial owner is the bare trust with a corporate trustee that is owned by the smsf's in direct proportion. You may not need a unit trust.

3 The rent etc goes back to each SMSF in proportion and each smsf makes the proportional repayment.

If you do this youll get spext advice from a lender and accountants detailed advice is beyond the scope of this forum.



Edited by rambler1 - 17/February/2011 at 19:00
Luke 11 46: Woe unto you also, ye lawyers! For you load men with burdens that are difficult to carry, and you yourselves won't even lift one finger to help carry those burdens.

HLE View Drop Down
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  Quote HLE Quote  Post ReplyReply Direct Link To This Post Posted: 10/March/2011 at 09:18
This is a very complicated loan. Please note that my company would not assist with this loan as the paperwork involved would make it unprofitable for us to do so.

With that being said I'm happy to give you some advice. As long as the directors of the trustee company for the unit trust are willing to guarantee the loan and their income is sufficient to service the debt then you can get a normal mortgage on this property.

You would need to apply with a lender that does not require unit holders to be guarantors. In this case the lender has recourse against the unit trust & the directors of the trustee of the unit trust. They do not have any recourse against the unit holders and as such there is no risk to the assets held in the Self Managed Super Fund(s).

From a legal point of view this is not too different from when a SMSF buys units in a property trust that has gearing.

Note that there are only a few lenders that accept this structure, and even fewer mortgage brokers / bank staff that understand what you are doing. So you may have trouble getting finance.

As a general rule if you lodge a complicated application with the banks then you'll have a really fun time trying to get an approval. If you can simplify it with fewer SMSFs involved then you may get a better response.
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  Quote MikeF Quote  Post ReplyReply Direct Link To This Post Posted: 11/May/2011 at 16:09
Hi

Whilst there are some lenders that lend to a unit trust structure on a 1st mortgage basis most residential lenders will want the unit holders to guarantee the debt as well and when they see that the unitholders are self managed super funds they will run a mile. Doing one now and CBA have said no because of who the unitholder is even with LVR of 16%.


Commercial lenders are different and will assess the transaction on a more commercial case by case basis.

As to the unit trust doing it via an instalment warrent/bare trust structure I don't think its necessary your just adding another layer of complexity.

The suggestion that all 6 SMSF's borrowing jointly using a non recourse instalment warrant type structure will also most likely not work as the major lenders will not currently allow SMSF's to borrow as tenants in common.

I'd go with your original structure and try and get a waiver on unit holders providing their guarantee.

Mike Feltscheer
www.navstarfinancial.com.au

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