How can my super fund borrow to invest in property?
Super funds in the past were not able to borrow to invest
in property, principally because a normal investment property
loan can put all the fund’s assets at risk.
A super fund can now invest in property through a Property Warrant,
because the warrant provides a ‘limited recourse’
loan to help finance the purchase of the property. This
limits your risk to the property itself – your other
assets are completely protected.
Many leveraged investments, like margin loans and normal
investment property loans, expose all your assets to risk
if there’s a default. With Quantum Property Warrants the risk
is limited to the value of the property – no matter
what happens.
Why invest in property?
The potential benefits of direct property investment –
rental income and capital appreciation – are well
known to investors. The graph below shows the capital growth
of property over the last 16 years.
Past peformance is not an indicator of future returns.
How does a Property Warrant work?
A Property Warrant transaction comprises a property purchase,
a loan to help fund it, interest payments on the loan and
rental income from the property.The property is purchased
and held in trust. Rental income is used to meet property
outgoings and part of the loan’s interest payments.
You pay any remaining interest.
|
Warrant Start
|
Each Year |
At 10 Years (maturity) |
|
Property purchased and held by the trustee on the
investor’s behalf |
Investor is entitled to all
rental payments less outgoings (e.g. rates, fees,
repairs, interest). |
Investor makes the completion payment. The property
is transferred to the investor. |
| Investor makes an initial payment |
Investor pays the loan’s interest annually
in advance and any principal repayment they wish to
make. |
Investor can make a completion
payment at any time up to maturity date. |
How is the Property purchased, held
and transferred to the Investor?
The property is held in trust until a completion payment
is made, at any time up to the Property Warrant maturity
of 10 years. Then the property is transferred to the investor.
The property is administered by Quantum for the life of the warrant.
How does the cash flow of a Property Warrant operate?
During the life of a Property Warrant, rental income is used
to pay the property’s outgoings, like insurance, repairs
and maintenance. The remaining rent offsets interest payments
for the next year. Investors pay the balance of the interest.
Interest is paid annually in advance.
This general advice has been prepared without taking into
account the objectives, needs or financial situation of
any individual. Investors should read the product disclosure
statement (PDS) before deciding to invest in this product.
You should consult your adviser and take into account your
own needs, objectives and financial situation before deciding
to invest.
Steps in Applying for a
QuantumWarrant
|
Steps |
Action |
|
Step 1 |
Investor reads PDS & decides to invest Completes
Quote Request Form |
|
Step 2 |
Accepts quote and returns to Quantum |
|
Step 3 |
Quantum sends application pack to investor |
|
Step 4 |
Investor completes application pack and sends cheque
for the first amount to Quantum |
|
Step 5 |
Application approved/ declined |
Reporting
After the end of each quarter (being March, June, September,
December), Quantum will provide a set of quarterly reports
which will outline the following; Income received, Property
expenses (including any fees paid to Quantum), Interest
accrued, Loan balance and details of any valuation completed
during that quarter.
Quantum will also advise quarterly any aspect of the Property
in relation to;
• New rentals
• Adverse market conditions
• Capital costs
• Repairs and maintenance issues
|
