“Turn the lights off on the way out the door” is exactly what Macquarie Bank did recently when they were the final bank in Australia to stop lending to SMSFs for the purposes of purchasing residential property.
As a result, SMSF Trustees who want to borrow money to buy investment property simply cannot get a loan from ANY bank in Australia to do so as a result of the move from April 30 this year. This follows scrutiny of the SMSF sector where it was found recently that 90% of advice to set up such a fund broke the law and raised concerns about ‘one stop shops’ where financial ‘advisors’ encourage investors to set up an SMSF and buy property from a real estate agent or developer with whom the advisor has a relationship and may earn large commissions from.
This, in addition to the Hayne Royal Commission, recent ATO warnings on SMSF diversification and concerns from the Council of Financial Regulators about leveraged SMSF’s speculating on residential property have all played a role in the death of limited recourse borrowing facilities in this sector.
Excessive fees for setting up the SMSF structures taken by financial advisers who also took hefty commissions on selling property to unsuspecting investors is a blight on the industry and advisor networks. However, exposure to residential property through an SMSF structure is still available to savvy investors through various listed and unlisted funds, and most importantly without the need for leverage.
The CFMG Land & Opportunity Fund is one of these unlisted funds and generates a fixed return of 12% per annum via development of residential property with a minimum investment of just $25,000.