19th May 2014

SMSFS surge towards $520,000 controlling $520 Billion in assets

More than half a million self-managed super funds are now in operation according to recent statistics from APRA. The average balance of an SMSF now exceeds $1 million, with the “average” fund balance now around $1,007,000, and the average balance for an SMSF member is $525,000. It is estimated that the SMSF market will grown to $2.23 trillion by 2033. The remarkable growth of SMSFs shows no signs of slowing.

With these statistics in mind, there has never been a better time to consider becoming involved in this growing market.

Spotlight Product – Commercial SMSF Lending

Commercial SMSF much larger than Residential SMSF

Interestingly the first point to make about commercial SMSF lending is that a lot of media coverage is given to SMSF investment in residential assets, but the reality is that SMSF investment in commercial assets is significantly larger.

The ATO estimates that in 2013, SMSF Direct Property holdings in residential was just over $20 Billon whereas commercial was just over $60 Billion. And commercial is growing at twice the rate both short and long term. So we should all be thinking about opportunities in commercial lending as the main game in SMSF.

Business owner investors

One main scenario driving this is particularly worth noting: it’s business owners purchasing the property from which their business operates as an investment. The business owner uses the cash flows of their business to pay off the investment while holding it in the SMSF as a tax beneficial structure. It can make a lot of sense as a reliable investment in the right commercial property that they’re already looking after.

We would also highlight a couple of other factors making commercial property particularly suited for SMSFs. First, commercial property yields are generally higher than those generated by residential property. Commercial property delivers average yields of 6%-7% p.a rather than the circa 4% p.a seen for residential property. Secondly, with many people already heavily invested in their own home, commercial property can be an excellent tool to diversify some property investment away from residential assets. As always, of course, this assumes that the quality of the investment is sound.

On that last issue potential investors do need to understand that a quality commercial investment is subject to quite a different evaluation process than typical residential investments.

  • It also diversifies your income streams away from purely residential;
  • It can be a straightforward entry point into commercial lending; and
  • It’s a quality value add suggestion you can give to clients, strengthening your relationship, and limiting others from presenting the opportunity.

La Trobe Financial is a long term Commercial SMSF lender

Like much commercial lending, Commercial SMSF is not a product as broadly available from lenders as Residential SMSF is. That puts La Trobe Financial into a stand out position outside of the banks.

We’re very committed to commercial SMSF long term. Our Commercial SMSF product makes great sense for brokers because we have deep and long term funding for quality commercial assets and because so much residential near prime lending is to self employed and small business operators. These borrowers are our core constituency and we want to service the relationship fully with you as their broker.

We also think a credit specialist lender is very well positioned to deliver Commercial SMSF lending. A Commercial SMSF deal is exactly the sort of scenario that can get caught in a bank credit department for weeks, even months. It’s exactly the sort of product that La Trobe Financial can get a broker through so much more easily and directly, without forgoing the legal essentials tailored for the product.

Simplicity at La Trobe Financial starts with one rate: 6.99%; and this rate applies as a special on all Commercial SMSF deals. Additionally you will find our criteria easier to understand:

  • 100% rental is accepted;
  • Alternative income verification and flexible servicing solutions are available;
  • we can do prime, clear and credit impaired.
  • No financial advice is necessary;
  • Our service proposition is to make lending simple and fast for brokers. If you come to us you can talk direct to the senior credit team. They’ll be delighted to walk you through the whole SMSF deal and then lead you through to settlement;
  • AND La Trobe Financial will never claw back your commission.

Brokers need to develop this product capability

We’d encourage all brokers who have or want to develop an exposure to small business borrowers to get commercial SMSF into their product suite now. This will enhance your client offering expertise and marketing breadth keeping in mind La Trobe Financial’s product approval speed and ease of dealing.

If you’d like to hear more about La Trobe Financial’s broader residential and commercial specialist product range and how we service our broker partners, we have a sales team on the ground nationally that can come to you. Call our broker hotline on 1800 707 707 and we’ll set you up immediately.

Latest news...

Commercial SMSF Video, Paul Wells, Division Head of the Asset Origination & Credit Team Australian Broker speaks with La Trobe Financial’s Chief Investment Officer, Paul Wells, about our views on commission clawbacks in the specialist lending market and the value to brokers of Australia’s niche credit specialist market. Investor Call Briefing Q3 FY2014, Chris Andrews, Head of Funds Management

... That's Lending

Best regards,
Paul Wells, Chief Investment Officer
La Trobe Financial Asset Management Limited

La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 123 staff and has managed over AUD$10Billion covering over 100,000 investment grade assets since inception in 1952.

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