How much money do you need in an SMSF to purchase an investment property?

Generally, most banks and lenders will require a minimum balance of $200,000 in a self-managed superannuation fund (SMSF) when considering finance for a property purchase. In addition, many lenders of this specialist finance require a deposit of 30% or higher.

Finance for property purchases in a SMSF is undertaken under Limited Recourse Borrowing Arrangements (LRBA). These is a type of borrowing structure that allows self-managed superannuation funds in Australia to invest in assets using borrowed funds.

The key characteristic of an LRBA is that the lender's recourse (i.e., their ability to claim repayment) is limited to the specific asset purchased with the borrowed money. This means that if the SMSF defaults on the loan, the lender can only seize and sell the asset purchased with the loan and cannot claim other assets of the SMSF.

LRBAs can be a valuable tool for SMSFs looking to enhance their investment portfolios, but they must be used with careful consideration of the associated risks and compliance obligations.

Important note - DPN offers access to specialist SMSF property finance and SMSF investment properties. DPN does not provide SMSF services and always recommends you seek independent financial advice to meet your individual needs and objectives.

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