Resources · Retirement and commercial
SMSF and commercial property
An SMSF property still has to suit the fund. A commercial property still has to survive its lease. Neither is a shortcut to a higher return.
01 · Extra rules, not a better yield
A fund has to consider cash flow, liquidity, diversification and the retirement purpose of superannuation. A property that looks attractive on its own can be the wrong asset inside the fund.
We do not provide financial product advice. Your SMSF adviser and accountant decide whether the fund should buy at all. We help test whether a property fits the constraints they set.
02 · Borrowing inside a fund is narrower
Limited recourse borrowing has specific structure, document and lender requirements. Not every property, and not every fund, will qualify. Timing is often tighter than a purchase in your own name.
The fund also needs enough liquidity to meet its obligations if rent stops or rates move. A fully stretched fund is a fragile one.
03 · Residential property inside super is restricted
In general, a residential property held by an SMSF cannot be lived in or rented by related parties in the way a personal investment sometimes can. That restriction changes which properties are even eligible.
Confirm the rule with the fund’s adviser against the specific property. Do not assume a listing is available to the fund because it is available to you.
04 · Why commercial is often considered
Commercial property can offer a different income profile. In some cases it allows arrangements that residential property inside a fund cannot. It also concentrates risk in one tenant and one lease.
The yield is not the decision. The lease, the building and the depth of replacement tenants are.
05 · What we look at on a commercial asset
We review location and re-letting depth, lease term and reviews, outgoings, incentives, building condition, and whether the price is supported by evidence rather than by the passing rent alone.
If the first asset does not meet the brief, that is a useful result. Changing strategy, as some of our clients have done, is sometimes the work.
06 · One set of facts for every adviser
A purchase like this usually involves the SMSF adviser, accountant, lender and solicitor, and a careful reading of the tenant’s position. We keep the property research in one place so those advisers are not working from different versions of the deal.
Start with the fund’s constraints, the income it needs and the timeframe. Then look at property. If the numbers change, the strategy should be allowed to change with them.
This is general information about how we approach the work. It is not financial, tax, credit or legal advice. Read the disclaimer, or start a conversation if you want to talk through your own position.