The SMSF must purchase property from an unrelated party and purchases must be arms-length, except for business real property, where other conditions apply. The investment in property must be consistent with your SMSF investment strategy. Choose any kind of property including residential, commercial or retail property and the legal owner of the real estate will be the Property Trustee.
The beneficial owner of the real estate will be the SMSF and the property is held in trust for the SMSF, which is entitled to its income. All rents are paid direct to the SMSF and the loan repayments are made in the ordinary way from the SMSF, after the loan is repaid the legal ownership of the property is transferred to the SMSF.

In the event of a loan default the lender only has recourse to the security property and cannot claim any other SMSF assets, providing the SMSF with absolute protection for its other assets. SMSF’s can deal with the property however and whenever they like, in the same way as investors can deal with “normal” investment properties, such as lease, renovate, repair, or sell, (subject to the terms of the relevant loan and mortgage).

The SMSF can pay out or reduce the mortgage at any time (subject to the terms of the relevant loan). When the mortgage is paid out in full, title to the property can be transferred to the SMSF. The Trustee can continue as registered proprietor.