A Limited Recourse Borrowing Arrangement (LRBA) is a specific type of loan structure that allows Self-Managed Super Funds (SMSFs) to borrow money to invest in property. It's the only way an SMSF can use borrowed funds to purchase an asset.
In an LRBA, the SMSF borrows to buy a single property, which is held in a separate bare trust. The 'limited recourse' part means if the SMSF defaults on the loan, the bank can only claim that specific property as collateral. This protects other SMSF assets, limiting the risk to the fund's overall wealth.