Using Super to Buy an Investment Property: A Buyer’s Guide

Property investment has long been a favoured strategy for building wealth and securing financial futures. But did you know you can use your superannuation to invest in property?

By using a Self Managed Super Fund (SMSF), you can buy an investment property, providing you with a valuable asset for your retirement.

In this guide, we’ll explain the essentials of using your super to buy an investment property and offer our top 10 tips for maximising your retirement savings and securing your financial future.

Understanding Superannuation and SMSFs

A superannuation fund, commonly called super, is a retirement savings system in Australia. Contributions made by employers (and sometimes employees) accumulate over one’s working life to provide income in retirement. Most people have their super in industry or retail funds, but some choose to set up a Self-Managed Super Fund (SMSF).

What is an SMSF?

An SMSF is a private self-managed super fund that you manage yourself. It is strictly regulated by the Australian Taxation Office (ATO). An SMSF can have up to four members, all of whom must also be trustees. SMSFs offer more control over your investment choices, including the ability to invest directly in property.

The key thing to remember is that SMSF property investment comes with strict legal and administrative obligations. For more information on SMSFs’ benefits, read our detailed blog post on the tax benefits of self-managed super funds.

Australia records largest drop in house and unit values within one year, CoreLogic data shows - ABC News

Why Consider Using Super to Buy Property?

Investing in property through your super can provide diversification and the capital to buy an investment property. This has the potential for capital growth and generating rental income while reducing your loan repayments quickly. You have the potential can enhance your retirement savings and provide a tangible asset that you can leverage through tax benefits.

Here are the top 5 reasons you should consider this strategy:


1. Control Over Investments

With an SMSF, you have more control over your investment choices than traditional super funds investing on your behalf. This control allows you to tailor your investment portfolio to suit your risk tolerance and financial goals better.

For example, you can choose the specific investment property you want to purchase, decide on the timing of your investments, and make strategic decisions about buying, selling, and managing properties.

This flexibility can be particularly advantageous in a fluctuating market, where being able to act quickly and decisively can significantly affect returns.

2. Potential for Higher Returns

Property can offer higher returns than other investments, although it has risks. Real estate has historically provided substantial capital growth, especially in desirable/high-growth locations where there is a good mix of commercial and residential property.

Additionally, property investment can generate consistent rental income, which, in addition to your super contributions, can be reinvested to further grow your SMSF or used to cover fund expenses.

Over time, property values generally appreciate, providing capital gains that can significantly boost retirement savings. However, it’s important to note that property markets can be volatile, and returns are not guaranteed. Commercial property investments can offer higher yields but also carry higher risk.

It’s essential to conduct proper market research and due diligence, before purchasing property, to maximise potential returns while mitigating risks.

10 Real Estate Marketing Strategies to Expand Your Business - Soho Real Estate

3. Tax Advantages

SMSFs benefit from concessional tax rates, which can maximise your investment returns. Income generated by your SMSF, including rental income from investment properties, is taxed at 15%, generally lower than individual income tax rates.

Capital gains on properties held for more than 12 months are taxed at an effective rate of 10%. Furthermore, once you enter the pension phase, the income and capital gains from purchasing property in your SMSF can become tax-free, provided the fund remains compliant.

These tax advantages can significantly enhance the compounding effect of your investments, accelerating the growth of your retirement savings.

4. Diversification

Adding an investment property to your super portfolio can diversify your SMSF and spread risk. Diversification is a key principle in investment strategy aimed at reducing risk by spreading investments across different asset classes.

By including an investment property in your SMSF portfolio, you are not solely reliant on the stock market’s performance or other traditional super fund investments. Property values often move independently of shares and bonds, providing a hedge against market volatility.

This diversification can lead to a more balanced and resilient investment portfolio that is better equipped to withstand economic downturns.

5. Retirement Security

A well-chosen property can provide a steady income stream in retirement. Rental income from investment properties can serve as a reliable source of cash flow, supplementing your other retirement income streams such as pensions or annuities.

This consistent rental income can help cover living expenses, healthcare costs, and other financial needs during retirement. Additionally, the property’s capital appreciation over time can further enhance your retirement fund.

Owning a tangible asset like property also provides security and stability, knowing you have a physical investment that can be leveraged or sold.

Our Top 10 Tips for Using Super to Buy an Investment Property


1. Understand the Rules and Regulations

Before diving in, it’s crucial to understand the ATO’s rules regarding SMSFs and residential property investment. Properties purchased through an SMSF must meet the “sole purpose test,” meaning they must solely provide retirement benefits to fund members. Additionally, fund members or their relatives cannot live in residential properties. For more information, check out our blog on complying with SMSFs.


2. Set Up a Compliant SMSF

Setting up an SMSF involves several steps, including creating a trust deed, appointing trustees, registering with the ATO, and opening a bank account. It’s essential to ensure your SMSF complies with all regulatory requirements. Seeking advice during this setup phase can save you from costly mistakes, and we highly recommend that you speak with your accountant or financial advisor.

3. Have a Clear Investment Strategy

An SMSF must have an investment strategy that outlines how it will achieve its objectives, considering risk, diversification, liquidity, and the ability to pay benefits. This strategy should include the decision to invest in property and how it aligns with your overall retirement goals.

4. Research the Market Thoroughly

Before purchasing a property, conduct thorough market research. Consider factors such as location, property type, potential for capital growth, and rental yield. Compare residential and commercial properties to determine which best aligns with your investment strategy.

5. Consider Commercial Properties

While residential properties are popular, commercial properties can offer higher rental yields and longer lease terms. They may also have less stringent borrowing requirements. Evaluate the pros and cons of both types to make an informed decision. Our blog on commercial lenders can provide further insights into financing commercial properties.

6. Understand Borrowing Rules

SMSFs can borrow to buy property through a limited recourse borrowing arrangement (LRBA). However, this comes with strict conditions. You must use the loan to purchase a whole property outright or a single asset, and the lender’s recourse is limited to the purchased asset. Ensure you fully understand these rules and seek advice if necessary.

7. Seek Professional Advice

Managing an SMSF and investing in property can be complex. Seek advice from financial advisors, accountants, and mortgage brokers specialising in SMSFs. They can provide valuable insights and ensure you comply with all regulations.

8. Evaluate Costs and Fees

Buying and maintaining a property involves stamp duty, legal and management fees, and maintenance costs. Additionally, SMSFs have their own set of fees, including setup costs, annual audit fees, loan costs, and financial advice costs. Ensure you factor these into your investment decision.

9. Consider Insurance

Insure your property adequately to protect the market value of your investment. Consider landlord insurance to cover rental loss, property damage, and liability. Insurance is an essential aspect of managing risk in property investment.

10. Monitor and Review Your Investment

Review your investment regularly to ensure it aligns with your SMSF’s investment strategy and goals. Property markets can fluctuate, and it’s crucial to stay informed and make adjustments as necessary. Regular reviews can help you maximise your returns and address any issues promptly.

Speak to an Expert

Using your super to buy an investment property through an SMSF can be a powerful strategy to enhance your retirement savings. By understanding the rules, seeking professional advice, and following a clear investment strategy, you can maximise the benefits of your investment property purchases and investment within your super.

Remember to regularly review and adjust your investments to ensure they continue to align with your retirement goals.

Ready to take the next step? Contact a mortgage broker experienced in SMSF property investments today to explore your options and secure your financial future.

Investment Property FAQs

Yes, under certain conditions, you can use your superannuation to buy a house, particularly if you are purchasing a property within a Self-Managed Super Fund and you meet the required conditions under your self managed super fund (SMSF).

An SMSF is a private super fund that you manage yourself, which can be used to purchase property as part of its investment strategy.

The property must be solely for investment purposes and comply with the sole purpose test. You cannot live in the property or rent it to a family member.

First home buyers can access up to $30,000 of their voluntary super contributions through the First Home Super Saver Scheme (FHSSS) to help with a home deposit.

The FHSSS allows first-time home buyers to make extra super contributions that can be withdrawn to purchase a home.

Investing in property through your super can be complex and comes with risks, such as property market fluctuations and potential impacts on your retirement savings. The costs are also relatively high compared to a traditional home loan.

Yes, but it must be done through a Limited Recourse Borrowing Arrangement (LRBA), where the lender’s recourse is limited to the asset purchased.

An LRBA is a loan structure used within SMSFs where the lender can only claim the asset being purchased if the SMSF defaults on the loan.

Setting up and managing an SMSF involves various costs, including establishment fees, annual auditing, and ongoing administrative costs.

No, the property must remain an investment and cannot be used for personal purposes, even after retirement.

mansour soltani


Mansour has spent more than two decades involved in the purchase and sale of real estate, acquiring both investment and commercial properties throughout Australia, including in major cities and smaller regional locations.

He is the proprietor of a finance brokerage firm, overseeing a portfolio worth in excess of 75 million in loans and serving a diverse clientele across Australia and a regular contributor to This has equipped him with extensive knowledge in various investment tactics, allowing him to offer significant insight.

LinkedIn Profile