Per Amundsen of Thinktank Commercial Lending explains why brokers should be checking their books for small business owners who would be interested in the SMSF lending opportunities presented by their commercial property.
Video transcript below:
Reporter: For brokers looking for a further chance to diversify, try taking a closer look at your books for small business owners. They may not be aware of the SMSF opportunities available to them regarding their commercial property.
Per Amundsen of Thinktank explains your existing client base could contain clients very open to this kind of transaction.
Per Amundsen, Director, Thinktank
Per Amundsen: The type of individuals that we found have been most attracted to the SMSF lending structure are self employed individuals who have a small medium sized business and are either renting their premises right now and would like to take the opportunity to acquire those premises or they have previously acquired their premises, but they are in a structure outside of an SMSF. And by putting it inside an SMSF they can take advantage of the tax benefits that accrue.
Reporter: For Amundsen the key starting point is understanding the client’s exact needs because the space offers a lot of variety.
Per Amundsen: Understanding what your client needs are, is probably the most important starting point and things such as what loan to valuation ratio is being sought. What type of amortisation period is going to suit their investment and their retirement plans because that’s what an SMSF is for, it’s retirement. It can be as low as 50% loan to valuation ratio, in which case the member guarantees may not be needed and can range all the way up to 75% where you have a principal and interest repayment plan over 25 years.
Reporter: Amundsen also stresses that to avoiding carrying a liability, it’s imperative that brokers get steps right.
Per Amundsen: I think there are a couple of key things that brokers can do to make sure that transactions like this run smoothly. One is to establish that contact and dialogue with the lender early in the piece, so that you understand exactly what the terms of the loan are going to be, what your lender can do for you, what sort of amortisation period they can provide, whether they require the guarantees of the members, things like that that are pretty basic to your client’s understanding of what they are getting into.
Reporter: Finally Amundsen asserts that even though the space is tricky, given time and a reliable brain trust behind the transaction, obstacles can be overcome. There are many SMSF products on the market, but not always ample advice.
Per Amundsen: We found that most of the common obstacles that you run into with SMSF lending can be overcome if you’ve got and allowed yourself enough time. The other key is making sure that you have a good professional supporting your client, so that you have a good accountant and solicitor, you have working a relationship with who knows and understands SMSF lending and this is especially true for your lender. If the lender doesn’t have a good understanding of SMSF lending, it makes it really difficult for you to perform for your client.