What and where to buy

You’ve got a pool of money, a set of rules, and a goal. Now let’s find the right property.

You’ve got the structure sorted. You know the rules. You’ve got lending arranged, or at least know what’s possible.

Now comes the fun part: finding the actual property.

But here’s the thing. Buying for your SMSF isn’t quite the same as buying outside super. The rules are different. The time horizons are different. The exit requirements are different.

Your SMSF has a type. Let’s figure out what it is.

Your SMSF’s dating profile

Imagine your SMSF is on a dating app for properties.

What would its profile say?

It might say something like: “Looking for a stable, long-term relationship. Must be low-maintenance. Needs to be attractive to others (tenants). Must be willing to be sold eventually without drama. No fixer-uppers, no projects, no renovations needed.”

That’s quite different from what you might look for personally.

Outside super, you might buy a property that needs work, renovate it, add value, and sell. You might buy something you could live in yourself one day. You might take a punt on an emerging area.

Inside super, you need to think differently.

Your SMSF can’t do major renovations while the loan is in place. You can never live in the property yourself. You’ll eventually need to sell it or pay pensions from its value. The property needs to work within these constraints.

Let’s build your SMSF’s property profile.

Location fundamentals

You’ve heard it a thousand times: location, location, location.

It’s a cliché because it’s true.

But what makes a good location for SMSF property specifically?

Population growth. Areas with growing populations have growing demand for housing. More demand means better rents and better capital growth. Look for areas where people are moving to, not moving away from.

Infrastructure investment. When governments spend money on roads, rail, hospitals, and schools, property values tend to follow. Infrastructure creates jobs and amenity, which attracts residents, which drives demand.

Economic diversity. Single-industry towns are risky. If that industry struggles, the whole town struggles. Look for areas with diverse employment bases: government, healthcare, education, retail, manufacturing, services.

Rental demand. Remember, you need tenants. Areas with strong rental demand, whether from families, workers, or students, will keep your property occupied. Check vacancy rates before you buy.

Supply constraints. If an area can easily build more housing, prices struggle to rise. If an area is constrained by water, geography, or planning rules, limited supply supports values.

If you’ve read my first book, Build, Stabilise, Leverage, you’ll recognise this as the growth corridor methodology. The same principles that identify good investment locations outside super apply inside super.

Don’t reinvent the wheel. Use what works.

Tenant appeal

You can never live in your SMSF property. Not a single night. Which means you need tenants.

This should change how you think about property selection.

When you buy for yourself, you might prioritise things that matter to you personally: a view, a particular style, a neighbourhood you love.

When you buy for tenants, you need to prioritise what matters to them.

Practical layouts. Tenants want bedrooms that fit beds, living areas that work, kitchens that function. They’re less interested in architectural statements.

Low maintenance. Big gardens, pools, and complex features mean more upkeep. Tenants often don’t maintain things as well as owners would. Choose properties that can handle a bit of neglect.

Proximity to essentials. Schools, shops, transport, employment centres. The closer these are, the larger your tenant pool.

Nothing too quirky. That converted warehouse might appeal to a niche market. But niche markets mean fewer potential tenants. Mainstream properties attract mainstream tenants.

Ask yourself: if this property came up for rent tomorrow, how quickly would it lease? How many applications would it attract?

If the answer is “quickly” and “lots”, you’re on the right track.

The liquidity question

Here’s something people don’t think about enough: liquidity.

Liquidity means how easily you can convert an asset to cash.

Shares are liquid. You can sell them in minutes and have cash in your account within days.

Property is illiquid. Selling takes months. There are agents, campaigns, negotiations, conveyancing. You can’t sell half a house if you only need a bit of cash.

This matters more inside super than outside.

Why? Because at some point, you’ll need to pay pensions from your super. Pensions must be paid in cash. You can’t pay a pension with a bedroom.

If your SMSF is 90% property and 10% cash, and you need to start paying pensions, you might have to sell the property at a bad time just to meet your obligations.

This means property selection should factor in eventual saleability.

Broad appeal. Properties that appeal to many buyers sell faster than properties that appeal to few.

Standard configurations. A three-bedroom house sells faster than a one-bedroom apartment in most markets.

Sensible price points. Properties at the median price or below have more potential buyers than expensive properties.

Good markets. Properties in active markets with lots of transactions sell faster than properties in thin markets.

Don’t buy something you can’t sell.

Helen and Bruce think about the exit

Helen and Bruce bought their SMSF property eight years ago. At the time, they weren’t thinking much about liquidity. They just wanted a good investment.

Now they’re in their late fifties. Retirement is visible on the horizon. And they’ve started thinking about what happens next.

Their SMSF is about 70% property, 30% other assets. If they start a pension at 65, they’ll need to draw a minimum of around $50,000 per year (roughly 4% of the balance).

The property generates about $35,000 per year in net rent. That covers most of the pension, but not all. The other $15,000 would need to come from selling shares or using cash reserves.

At that rate, they’d run through the non-property assets in about 20 years. Then what?

Helen and Bruce have options:

• Sell the property before they start the pension and reinvest in liquid assets

• Keep the property and plan to sell later when they need to

• Downsize the property to something smaller and more liquid

None of these options are bad. But they require planning. Helen and Bruce are glad their property is in a good market with broad appeal. When they do need to sell, it should move quickly.

Imagine if they’d bought a quirky property in a thin market. They’d be stuck.

New build vs established

Should your SMSF buy a new property or an established one?

There’s no universal answer, but here are the trade-offs.

New builds:

• Higher depreciation deductions (more tax benefits)

• Lower maintenance costs initially

• Modern layouts that tenants often prefer

• Often located in new estates with less established infrastructure

• Risk of oversupply in new development areas

• Can’t do LRBA renovations anyway, so “buying a renovator” isn’t relevant

Established properties:

• Usually in more established locations

• Land content often higher (land appreciates, buildings depreciate)

• Proven rental history and comparable sales data

• May need more maintenance

• Lower depreciation deductions

For SMSF purposes, established properties in good locations often make more sense. You’re buying for long-term growth, and land value drives growth. New builds in fringe estates might have great depreciation but poor growth prospects.

That said, a well-located new build can be excellent. It’s about the specific property, not a blanket rule.

Traditional rental vs short-term rental

We touched on this in the last chapter, but it’s worth exploring further.

Airbnb and similar platforms have created a new rental model. Some properties can earn significantly more through short-term rental than through traditional leases.

Can your SMSF property use this strategy?

Yes, with conditions.

You still can’t use it yourself. I know I keep saying this. But people keep asking. The answer is no. Never. Not even one night.

Your lender needs to be okay with it. Some SMSF lenders specifically exclude short-term rental properties. Check before you commit.

Council rules apply. Many councils now regulate short-term rentals. Some areas require permits. Some have day limits. Know the rules.

Management is more intensive. Someone needs to handle bookings, guest communication, cleaning, supplies, reviews. If you’re doing it yourself, that’s your time. If you’re paying someone, that’s 20 to 30 per cent of revenue.

Income is less predictable. A traditional lease gives you 12 months of known income. Short-term rental varies by season, by tourism trends, by competition. Your SMSF needs to handle the volatility.

Short-term rental can work brilliantly in the right location with the right property. It can also disappoint if the numbers don’t stack up after realistic costs.

Run the numbers conservatively. Assume lower occupancy than the best-case scenario. Factor in all the costs. Then decide.

What to avoid

Let me give you a quick list of what to steer clear of.

Properties needing major work. You can’t renovate significantly under an LRBA. Buy something that’s ready to rent.

Off-the-plan in oversupplied markets. Property developers love selling off-the-plan to SMSF investors. Be very careful. Many of these are in areas with massive supply pipelines. Oversupply kills growth.

Anything a spruiker is pushing. If someone at a seminar is urging you to buy, run the other way. Legitimate investments don’t need high-pressure sales.

Niche properties. That student studio pod, that aged care apartment, that serviced apartment. Niche products have niche markets. Think mainstream.

Properties in declining areas. Cheap doesn’t mean good value. A $150,000 house in a town losing population is probably losing population for a reason.

Anything you’d want to live in yourself. Sounds counterintuitive, but if you’re attracted to a property because you’d love to live there, check your motives. You can’t live there. Ever. Make sure you’re buying for investment reasons, not personal fantasy.

Due diligence essentials

Before you commit to any property, check these boxes.

Rental appraisal. Get a written rental estimate from a local property manager. Better yet, get two or three. Don’t rely on seller estimates.

Vacancy rates. Check the vacancy rate for similar properties in the area. Under 3% is tight (good for landlords). Over 5% is soft (risk of vacancy).

Comparable sales. What have similar properties sold for recently? Is the asking price in line with the market?

Building and pest inspection. Non-negotiable. You need to know what you’re buying.

Strata records (if applicable). If it’s a unit, check the strata records for planned works, disputes, and financial health of the owners corporation.

Council zoning and plans. Is there a highway planned through the backyard? A high-rise development next door? Check what council knows.

Flood and bushfire mapping. Climate risks are increasing. Know what you’re exposed to.

This due diligence costs time and money. It’s worth every cent. The worst property you buy will be the one you didn’t investigate properly.

Finding the right match

Your SMSF has a type. A profile. A set of needs and constraints.

The right property for your fund is one that:

• Is in a location with strong fundamentals

• Appeals to a broad tenant pool

• Will be liquid when you need to sell

• Doesn’t need major work

• Fits your fund’s risk tolerance and cash flow needs

Don’t fall in love with a property that doesn’t match your profile. There are plenty of properties out there. Be patient. Be picky. Be disciplined.

The right property will come along. Your job is to recognise it when it does, and have the discipline to walk away from the ones that don’t fit.

Find your sweet spot, or have the guts to walk away.