Paul Glossop: Welcome again guys to Pure Property Investments one on one. Today I’m joined by Anthony Pears. Anthony thanks for joining us mate. Anthony is a partner at Integra Financial Planning, or Integra Financial Services. Today we want to talk about, if you don’t mind Anthony in sharing with our viewers a little bit more limited recourse borrowing, something that’s becoming quite topical at the moment. So your position as a financial planner, I think you’d be well positioned to probably give our viewers a bit of insight into what it means and what they need to look out for.
Anthony Pears: Yeah sure. Thanks, Paul. With limited recourse borrowing it’s actually seems like an actual complex transaction but it’s actually quite simple. What actually occurs is that a property is actually bought in a Self Managed Super Fund; it’s actually bought in what they call a bare trust. So it’s an actual trust that’s attached to the Self Managed Super Fund. Now the reason it’s done that, is because there is by the very nature it’s a limited recourse. So what that actually means is the financial institution actually has a limited recourse back to the actual asset itself. So if something ever goes wrong, the financial institution cannot get any other assets of the Self Managed Super Fund. So they are limited or re-coursed back to the property only. So, in that sense because compared to like personal finance, where if something goes wrong a bank can get a property bid other assets, because I can’t do that with a Self Managed Super Fund, the actual loan is a little bit more expensive as well, and there’s more restrictions attached to it.
Paul Glossop: Yeah, it’s good insight, and I think from that front, it’s quite important obviously in the fact that’s when it comes down to Self Managed Super Fund investing in retirement plans, obviously the intention is to make sure it’s got as much asset protection as you can because if you’ve got all your eggs in that one basket or you’ve got certain other aspects or certain other funds or cash or anything sitting there that if something goes wrong with your investment, a) they can come and grab investment b) you really want to make sure there’s some clear delineations and obviously limited recourse borrowing in an SMSF really gives the buyer or borrower the ability to make sure they’ve got some protection in their assets.
I think from my side of things when you are looking at buying a property potentially in that Self Managed Super Fund having a chat with someone like Anthony whose experience in that space really would give the ability to understand the structure, and what the pros and cons will be down the track as well and always understanding those before you buy is going to be absolutely vital.
So, if you do want to catch up with Anthony or anyone from his team feel free to contact him at the bottom of the screen, his details will be there and likewise from outside from a property perspective, you can contact us or anyone from our team on the number below. We’ll no doubt catch up with you soon. Cheers!