Why Buy Property in Your SMSF? - April 2025

By Guest Blogger, Yuvraj Kapadia, Director - Super Snap

A Self-Managed Super Fund (SMSF) is an increasingly popular vehicle for Australians looking to take control of their retirement savings. With the ability to invest in a wide range of assets, including property, SMSFs offer a unique opportunity for individuals seeking to grow their wealth strategically. 

One of the most compelling investment options within an SMSF is purchasing property, a strategy that has gained traction among those looking to maximise their retirement savings. In this article, we'll explore why buying property within an SMSF is an attractive option, the key benefits and risks, and how to navigate the process successfully.

What is an SMSF?

With greater flexibility, individuals and business owners can carefully select and construct their SMSF portfolios to  reflect their unique financial objectives and risk tolerance. This flexibility allows for a tailored investment approach 
that may not be available within traditional superannuation structures.

Can you Buy Property in an SMSF?

Yes, property investment is allowed within an SMSF, but strict rules apply. Understanding these rules is crucial for any SMSF member looking to invest.

Types of Property Allowed:

Residential Property
Must be acquired from an unrelated party and cannot be used by fund members. This includes any form of residential dwelling or leasehold property.

Commercial Property
SMSFs can purchase commercial real estate, including office spaces, warehouses, and retail locations, which can be leased to a member's business at market rates. This aspect provides an opportunity for business owners to secure their business premises while simultaneously building wealth in their SMSF.

Benefits of Buying Property in an SMSF

Risks and Considerations

While there are many benefits to buying property in an SMSF, it is essential to be aware of the risks involved.

a) Borrowing Restrictions (Limited Recourse Borrowing Arrangements - LRBA): SMSFs can borrow to buy property, but only through a Limited Recourse Borrowing Arrangement (LRBA). This means the lender's recourse in the event of a default is limited to the property purchased with the borrowed funds. However, loans must comply with strict regulations, and banks typically require a higher deposit of 30-40%, which may limit the ability to leverage 
effectively.

b) Liquidity Concerns Property is an illiquid asset, making it challenging to sell quickly if the SMSF needs cash flow. SMSFs must ensure they have sufficient funds for loan repayments, maintenance, and annual compliance costs.

c) Regulatory Complexity SMSFs are heavily regulated by the ATO and require annual audits. Trustees must stay 
compliant with tax laws, superannuation regulations, and investment rules.

d) Selling Constraints - unlike personal property investments, SMSF properties cannot be accessed until retirement. 
Selling an SMSF property may be challenging due to taxation implications and fund regulations.

Who Should Consider Buying Property in an SMSF?

Investing in property within an SMSF is suitable for these types of investors who understand the complexities and requirements of this investment strategy.

Steps to Buy Property in SMSF

Conclusion

Disclaimer: All information contained on this email is provided as an information service only and, therefore, does not constitute, and should not be relied upon as, financial product advice. None of the information provided takes into account your personal objectives, financial situation or needs, and you will need to make your own decision about how to proceed. Alternatively, for financial product advice that takes account of your particular objectives, financial situation or needs, you should consider seeking financial advice from an Australian Financial Services Licensee before making a financial decision. Super Snap SMSF does not hold an Australian Financial Services Licence (AFSL) and we are not authorised representatives of an AFSL. We do not provide financial product advice or recommend any financial products either expressly or implied.

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