Superparamagnetic iron oxide nanoparticles (SPIONs) and core-shell type nanoparticles, consisting of SPIONs coated with mesoporous silica and/or lipid, were synthesized and tested for their potential theranostic applications in drug delivery, magnetic hyperthermia and as a contrast agent. Transmission Electron Microscopy (TEM) confirmed the size of bare and coated SPIONs was in the range of 5-20 nm and 100-200 nm respectively. The superparamagnetic nature of all the prepared nanomaterials as indicated by Vibrating Sample Magnetometry (VSM) and their heating properties under an AC field confirm their potential for hyperthermia applications. Scanning Column Magnetometry (SCM) data showed that extrusion of bare-SPION (b-SPION) dispersions through a 100 nm polycarbonate membrane significantly improved the dispersion stability of the sample. No sedimentation was apparent after 18 hours compared to a pre-extrusion estimate of 43% settled at the bottom of the tube over the same time. Lipid coating also enhanced dispersion stability. Transversal relaxation time (T2) measurements for the nanoparticles, using a bench-top relaxometer, displayed a significantly lower value of 46 ms, with a narrow relaxation time distribution, for lipid silica coated SPIONs (Lip-SiSPIONs) as compared to that of 1316 ms for the b-SPIONs. Entrapment efficiency of the anticancer drug, Doxorubicin (DOX) for Lip-SPIONs was observed to be 35% which increased to 58% for Lip-SiSPIONs. Moreover, in-vitro cytotoxicity studies against human breast adenocarcinoma, MCF-7 cells showed that % cell viability increased from 57% for bSPIONs to 82% for Lip-SPIONs and to 87% for Lip-SiSPIONs. This suggests that silica and lipid coatings improve the biocompatibility of bSPIONs significantly and enhance the suitability of these particles as drug carriers. Hence, the magnetic nanomaterials prepared in this work have potential theranostic properties as a drug carrier for hyperthermia cancer therapy and also offer enhancement of contrast agent efficacy and a route to a significant increase in dispersion stability.