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Prior to 2007 SMSF’s were not permitted to borrow money. The legislation changed to allow SMSF’s to borrow for the purpose of purchasing investment real estate.
Any commercial real estate can be purchased in a SMSF using the property as security for a loan. The commercial real estate can be let to a third party or to the members of the SMSF to run their own business. However there are strict rules covering the purchase of residential property.
Residential real estate must only be purchased with one contract. Simply put that means that a block of land can’t be purchased on one contract and a contract to build a house on that land on a separate contract. That would be two contracts and is prohibited.