Yes. However, there are strict rules governing how the loan and subsequent property purchase is structured when using borrowed money inside an SMSF.
Borrowing through an SMSF for property investment purposes must be done under what is referred to as a limited recourse borrowing arrangement. These arrangements can be quite complicated and may require professional advice. For example, under these arrangements, the property must be kept separate from the fund’s other assets. This ensures that if the fund defaults on making loan repayments, the bank and any interested parties will only have recourse over the property, but not to other fund assets. In order to achieve this, the borrowing rules require you to establish a security trust which will recognise the beneficial interest of the SMSF in that property and the rights of the lender. The trustee of this security trust holds the property in trust with the SMSF as the beneficial owner.
Another important factor when borrowing to invest in property is that loan conditions in an SMSF are different to those for regular housing loans. The maximum loan amount relative to property value will generally be lower and a range of conditions and risks need to be considered.
So, if you are considering borrowing through your SMSF, you should contact us for specific advice.