‘Follow the Bunnings’: Top Tips for SMSF Property Investors

Investing in commercial property through a self-managed superannuation fund (SMSF) is an increasingly attractive strategy for those looking to secure stable yields and long-term capital growth. While residential property investment has faced tightening regulations and diminishing returns, commercial real estate remains a lucrative option—particularly for SMSFs in the retirement phase.

At Boa & Co. Chartered Accountants, we specialize in helping SMSF investors navigate the complexities of commercial property investment. Whether you’re considering direct ownership, real estate investment trusts (REITs), or private credit, our expert financial advice ensures you maximize returns while staying compliant with superannuation regulations.

Why Commercial Property?

SMSF investors are drawn to commercial property for several reasons:

? Attractive and stable rental yields – typically ranging from 5% to 8%.

? Long-term lease agreements – providing consistent income streams.

? Favorable lease terms – rent increases often tied to inflation or CPI.

? Tax advantages – concessional tax rates on income and capital gains.

Unlike residential properties, commercial leases often favor landlords, with longer rental agreements and more predictable cash flow. This makes commercial real estate a compelling option for those looking to build wealth in retirement.

1. Direct Investment: ‘Follow the Bunnings’

For SMSF investors with a budget between $500,000 and $2 million, direct commercial property investment—particularly in regional areas—can be a rewarding strategy.

A smart approach is to “follow the Bunnings”. When a major retailer like Bunnings moves into a regional center, it signals strong economic growth, rising consumer demand, and solid infrastructure investment. Regional towns with populations of 50,000 to 100,000, such as Townsville, Wagga Wagga, and Ballarat, offer excellent opportunities for commercial investors looking to capitalize on expanding local economies.

? Retail and industrial properties in these areas often provide rental yields between 5% and 8%.

? Leases typically range from 3 to 5 years, ensuring steady income and periodic rent increases.

? Industrial property demand continues to rise, driven by e-commerce and supply chain expansion.

2. Real Estate Investment Trusts (REITs): Passive Exposure to Commercial Property

If direct property investment feels too hands-on, REITs offer a simpler alternative. These funds pool investor capital to acquire and manage a diversified portfolio of commercial properties, providing exposure to high-quality assets without the burden of direct ownership.

? Attractive yields – with some unlisted REITs offering returns up to 8.6%.

? Liquidity advantage – listed REITs allow investors to buy and sell shares easily.

? Access to premium assets – including office buildings, shopping centers, and industrial properties.

For example, the Charter Hall Direct PFA Fund, which invests in properties leased to government and corporate tenants, is currently yielding 8.6% annually—a compelling return for SMSF investors seeking income stability.

3. Private Credit: High Yields with Higher Risk

Private credit is another option for SMSFs looking to generate high returns. In this model, investors provide funding to property developers and commercial real estate projects, earning interest payments in return.

? Yields between 8% and 12%, typically paid monthly or quarterly.

? Strong demand – as traditional banks reduce lending to developers, private credit fills the gap.

? Diverse investment opportunities – funding developments or refinancing existing properties.

However, higher returns come with increased risk. Investors should carefully assess:

• The lender’s track record and risk management strategy.
• The capital stack position—how high the investment sits in the repayment priority order.
• Whether the project has a 30% to 40% equity buffer, ensuring a safety margin in case of market downturns.

How Boa & Co. Helps SMSF Investors Navigate Commercial Property

Investing in commercial real estate through an SMSF requires careful structuring, compliance with superannuation laws, and tax-efficient strategies. Boa & Co. specializes in:

? Structuring SMSF property purchases to ensure compliance with borrowing restrictions.

? Optimizing tax benefits by minimizing capital gains tax and maximizing concessional rates.

? Identifying the best financing options for direct property purchases or REIT investments.

? Assessing risk factors for private credit and commercial property deals.

If you're considering commercial property for your SMSF, let Boa & Co. guide you toward a profitable and compliant investment strategy. Call us today at 1300 952 286, email [email protected], or visit www.boanco.com.au to explore your options.