The Smart Way Business Owners Are Using Super to Buy Commercial Property with Smaller Deposits

Understanding Loan-to-Value Ratios (LVR) and SMSF Borrowing Capacity

For many business owners, buying property through their SMSF feels complicated — but it doesn’t have to be. In fact, with recent changes to SMSF lending conditions, securing a loan to buy residential or commercial property through your super might be easier than you think.

The key? Understanding how Loan-to-Value Ratios (LVR) work — and how they affect how much your SMSF can actually borrow.

Although the major banks have exited the SMSF loans market, many second-tier lenders have stepped in, offering specialist SMSF borrowing products for both residential and commercial property investment.

Smart lending starts with the right advice.

Wondering how much your SMSF could borrow? Talk to Causbrooks Finance today for tailored advice on SMSF lending, LVR rules, and buying property through super.

What is the Loan-to-Value Ratio (LVR)?

LVR is the percentage of the property's market value a lender is willing to finance. The higher the LVR, the smaller the deposit required — but the greater the perceived risk for the lender. Put simply — the higher the LVR, the less deposit your SMSF needs, but the higher the lender’s risk (which often means higher interest rates).

The LVR measures the relationship between the amount you borrow and the market value of the investment property or commercial property being purchased. It directly impacts your SMSF’s borrowing capacity. Note, SMSFs typically have higher interest rates compared with rates for individual borrowers.

Example:

If an SMSF wants to buy a residential property valued at $500,000, and the lender offers an 80% LVR, the SMSF can borrow up to $400,000 and must fund the remaining $100,000 from its own assets.

Typical LVRs for SMSF Loans

Most lenders will offer an LVR of between 70% to 80% for SMSF loans on residential property, depending on the fund’s total assets, investment strategy, and ability to service the loan. An LVR of 80% is now achievable for commercial properties as well.

Key factors lenders will assess include:

• The fund’s total assets and liquidity
• Expected rental yield from the property investment
• The ability of SMSF members to continue benefit payments and contributions
• How close the SMSF members are to retirement
• Whether or not the borrower has a 10% liquidity buffer to cover emergency costs, which have to be funded by the SMSF, for example, 12 months mortgage payments

Case Study: How an SMSF Helped This Business Owner Couple Secure Their Dream Warehouse

Owning their warehouse always felt just out of reach

Ben and Sarah are a married couple who run a successful carpentry business in Western Sydney. Their warehouse is the heart of their operation — storing everything from custom installations to handcrafted furniture for major events across NSW.

Like many business owners, Ben and Sarah dreamed of buying the commercial property their business operated from. But with lenders only willing to offer a 60% LVR on commercial property loans, that dream seemed impossible until they discovered how their super could help them do it.

Business Owners Struggling to Buy a Commercial Property with a 60% LVR

When they first approached lenders, the maximum Loan-to-Value Ratio (LVR) for commercial property in their situation was just 60%. That meant they would need to come up with a 40% deposit — well over $800,000 for the property they had their eye on. Even with strong business cashflow, that kind of capital just wasn’t feasible without jeopardising their working capital.

How an SMSF Loan Helped Increase Their Borrowing Capacity

When Ben and Sarah came to Causbrooks Finance, we explored alternative strategies — including the option of using their combined superannuation through a Self-Managed Super Fund (SMSF).

Recently, lending conditions for SMSF loans had improved — with some lenders now offering up to 80% LVR on SMSF purchases of commercial property. That changed everything.

Working with both Causbrooks Accounting and Causbrooks Finance, we:

• Structured and set up a new SMSF for Ben and Sarah
• Rolled over their existing super balances into the SMSF
• Helped them secure pre-approval through an SMSF loan at 80% LVR
• Structured the purchase using a Limited Recourse Borrowing Arrangement (LRBA) to stay compliant with superannuation rules

The Benefits of Using an SMSF to Buy Commercial Property

Ben and Sarah were able to purchase their dream warehouse through their SMSF — using their combined super balances for the 20% deposit and associated costs.

This means there was:

• No need to dip into business cashflow.
• No personal assets at risk.
• Their super is now working harder — backed by a tangible asset their business uses every day.

Today, instead of paying rent to a landlord, their SMSF owns the property — and their business pays rent directly to their super fund (at market rates), helping them build wealth for retirement.

Ready to Explore SMSF Loans for Commercial Property?

If you’re a business owner looking to buy a commercial property, but you're struggling with loan deposit requirements, an SMSF strategy could be the solution.

Book a free call with one of our brokers at Causbrooks Finance today. We can work with your existing accountant or financial planner to structure the loan for your SMSF, or, if you need help with setting up the Self Managed Super Fund, one of the SMSF accountants at our sister company causbrooks.com.au can help.

Why Expert Advice Matters: Get Expert Advice Before Borrowing

Borrowing money through an SMSF involves navigating complex rules, especially when setting up a Limited Recourse Borrowing Arrangement to invest in residential or commercial property.

A SMSF loan strategy should consider:

• Optimising the deposit to lower the LVR
• Aligning your investment strategy with borrowing limits
• Ensuring rental income covers mortgage repayments
• Planning for benefit payments and liquidity needs
• Understanding the risks of SMSF loans generally

Maximise the potential of your SMSF with expert advice.

Reach out to us at info@causbrooksfinance.com.au to book a call with one of our brokers today and make your dream a reality.