Over 1.1 million Australians are members of Self-Managed Super Funds (SMSFs).  

Unlike other fund types, SMSFs provide people more control over which asset types to invest their retirement savings in.  An SMSF is for your long term retirement planning and any investments and strategies need to be in your best interests to help you create more wealth for your retirement, while at the same time abiding by the SMSF rules and regulations.  

One of the most common vehicles for investment is property. However, buying property at the best of times can be a time consuming and stressful activity so how do you ensure you are buying the right property when your retirement is at stake.  

Our Senior Buyer Agent, Robert Di Vita and Financial Planner, Joe Virgona from Your Money Manager provide their top 5 tips on getting the property purchase right.   

Residential or Commercial

Firstly, you can buy a residential or commercial property. 

A residential property purchased through your SMSF must be used as an investment and it can only be rented out to tenants outside of your family. However, commercial properties have the additional appeal that if you are a business owner you can buy the premises with your SMSF and your business can then rent it back. 

Buyer Advocate Robert Di Vita advice is “There are significant penalties if you purchase an investment property through your SMSF and you do not use it correctly. Residential properties cannot be used as holiday homes or even short let arrangements where you may occupy it some of the time.”  

Capital Growth versus Rental Yield 

Before you can decide what your financial goals are you must calculate how long you have until retirement and your ability or desire to use a loan.  

Financial Planner Joe Virgona explains “If you are close to retirement, you may prefer a higher rental yield that results in your property being cash flow positive so that the rent is a source of income. If you have more time before retirement, seeking a property that’s value will grow significantly will help your super funds accumulate more over the long term.” 

Mr Di Vita chipped in “It can be difficult to achieve high growth and a high rental yield in one property. And I think it is important to define what high capital growth is, in Victoria, we would define high capital growth as achieving at least 5 to 7% growth per annum on average.

Effects of different capital growth rates over 10 years

If we were to generalise what property types are likely to achieve high capital growth, houses on a significant parcel of land are definitely at the top of the list. A house on land in areas that are gentrifying and near amenities are worth investigating. 

“If the block is large enough for subdivision when it comes to sell you may also have developers snapping at your heals,” said Mr Di Vita. 

Conversely to achieve a higher rental yield, apartments in boutique blocks off main roads but close to amenities and public transport in lifestyle suburbs are a good way to go.  

“Currently lifestyle suburbs like Elwood, South Yarra, East Melbourne and Richmond are attracting high paying renters,” recommended Mr Di Vita. 

If you a striving for balance look at villa units that have a small land component and a lock-up garage in lifestyle suburbs. 

Joe Virgona added “While capital growth might be your focus, don’t forget you need to consider the SMSF rules. You cannot use borrowed funds for any subdividing of any property or for any capital improvements. You must have enough surplus funds outside of any SMSF borrowing arrangements to do this type of work to a property.”

“You will also need to determine if the future rent will be enough to cover the minimum income levels that need to be paid once your super moves to retirement (pension) phase. Alternatively, your plan may be to sell once you reach retirement to reap the benefits. There are significant tax savings if you sell at retirement, such as no tax being payable once your fund is in retirement (pension) phase.” 

Rental Appeal

The Coronavirus pandemic has put into stark relief the importance of your property appealing to different types of tenants. Unit vacancies in inner Melbourne apartment blocks have soared as they relied mostly on one type of tenant, internationals.  

Your property needs to appeal to a wide pool of tenants for example families, couples, students and professionals. Your property’s location and scarcity will increase its appeal. Buy near hospitals, universities, work hubs, shops and public transport. Buy where owner-occupiers dominate. 

Mr Di Vita said ‘Scarcity is important, we recommend you avoid high rise apartments in areas like Southbank, Docklands and the CBD. If the local council is pro-development, you may find that your investment property is fighting with 100s of other investment properties for a tenant.” 


Diversifying your assets can strengthen your super fund and generate less risk. The saying “don’t put all your eggs in one basket” holds true for SMSFs and property investment. 

Joe Virgona advises “It is usually not recommended that an investment property or properties make up 100% of your super fund investments due to considerations such as diversifying your assets and having enough liquid funds once you hit retirement.” 

Mr Di Vita recommends if you are investing in multiple properties, you should diversify the type and location of properties. For example, residential and commercial, or inner-city boutique apartment and outer suburb large block in gentrifying areas. 

Clear Goals

There are many benefits to purchasing an investment property with your SMSF however they can only be realised if you get the property purchase right from the start. 

Make sure you have a clear financial strategy and find out what property types will help you achieve that goal. We know we are biased but speaking to and engaging with experts will improve your chances of enjoying retirement on a champagne budget instead of a beer one. (nothing against beer!) 

And remember there are many important rules in regards to the setup and running of an SMSF so it is critical that you seek advice before undertaking any investment or strategy.  

Case Study
Buying with your SMSF

A married couple with an SMSF engaged us to find and secure a property that they could purchase. They were planning to use a combination of their super money and borrowings from a lender and had about 15 years until retirement. They wanted something with good capital growth prospects, quality tenant appeal and would be easy to maintain.