A growing business paying someone else's mortgage
Our client runs a very specialised business in Cooroy. He's self-employed, and for years he operated out of rented premises, moving between a few different landlords as the business grew. And it has grown, steadily, every single year.
At some point most business owners in that position start asking the same question. Why am I paying rent to someone else when I could own the building myself?
For him it was about more than the rent. Owning his own premises meant control. He could shape the space around how the business actually runs and plan for growth on his own terms, without a lease ending or a landlord changing their mind.
When borrowing capacity runs out
The problem was timing. Between his personal and business lending, he had already used up his borrowing capacity. The business was doing better than ever, but lenders assess what's on paper, and the next set of financials that would show that growth wasn't ready yet.
His accountant raised another option: buying a commercial property through his self-managed super fund.
Business owners can buy commercial premises through their SMSF and lease them back to their own business. The rent is paid to the fund at market rates instead of to an outside landlord. For the right person, with the right advice around them, it can be a really powerful strategy.
The twist: it was a block of land
Here's where it got interesting. The property he found wasn't a finished building. It was a vacant block, and the plan was to build custom premises designed specifically for his business.
An SMSF can borrow to buy a property, but there are strict rules about what can be done with that property while the loan is in place. Borrowed money can't be used to build on it or turn it into something materially different. Put simply, you can't buy land in your super fund with a loan and then build on it.
So the straightforward approach was off the table. We needed a different route.
Building first, super fund second
Over the last two years we've worked closely with him to fund the land purchase and the commercial construction in his own name first.
Commercial construction lending is a completely different beast to residential. Builds generally take longer, and there are far fewer lenders who are comfortable funding these facilities. Finding the right lender and structuring the loan so it suited both the build and the longer-term plan took a lot of work.
While the building went up, the client was also getting his super fund ready. That side sat with his accountant and his SMSF specialist rather than with us, but it was a big part of the plan. He moved his business from a sole trader to a company and started paying himself a wage, and he made sure enough was going into his fund so it could take on the property when the time came.
Where things stand now
The building is finished. It was designed around his business and he's already operating from it. Right now it's held in his personal name.
The final step is moving it into his SMSF, and that SMSF commercial property loan has recently been approved. We're now working alongside three different lawyers, his accountant and his SMSF specialist to complete the funding and move the property into the fund as planned.
There are a lot of moving parts. Keeping everyone on the same page and working to the same timeline is a big part of what we do on a deal like this.
Why the long way round was the right way
Not every finance journey takes a straight line. Sometimes the end goal is clear, but getting there takes a few curves and twists. You might need to do things in a different order first, or get your structures right before the final piece can fall into place.
This type of lending is slower. But for a self-employed business owner, working with a local broker who understands self-employed income and SMSF commercial lending meant he could bring everything to one place. Instead of looking at each loan on its own, we could map out the next couple of years for his business together.
And we don't stop there
Once this settles, the work keeps going. He has plenty of growth plans in place, and we'll keep supporting him with asset finance and whatever the business needs next.
It's a wonderful business and it keeps getting stronger. Watching these clients go from strength to strength has been a real highlight for us, and we're grateful to be part of it.
Thinking about owning your business premises?
If you're self-employed and wondering whether buying your own commercial property, inside or outside super, could work for you, come and have a chat. We'll look at where you are now and where you want to be, then work out the steps in between.
This article is general information only and doesn't take your personal circumstances into account. SMSF strategies should always be discussed with your accountant, SMSF specialist or licensed financial adviser.
