Lloyd Edge is the director and founder of Other Real Estate Professionals. His new book, Buy Now, is the ultimate guide to owning and investing in real estate.

It’s no secret that housing affordability has become an issue for many Australians, especially those living in capitals such as Sydney, Melbourne and Brisbane. While real estate prices could fall in these areas, owning your own home is still out of reach for many first-time home buyers trying to get on the property ladder.

During our recent federal election, housing affordability was a contentious topic, with both sides offering their solutions to help more people buy their first home. For a select few, Labour’s ‘Help to Buy’ scheme will see the government contribute up to 40% of a house’s value, meaning you might only need a down payment 2% to buy a house.

One option available to potential investors to help them break into an increasingly difficult real estate market is to use an SMSF (super self-directed fund). Note that you cannot use a regulated super fund, such as an industry or retail super fund, to purchase property.

The advantages of an SMSF are that it allows you to invest in a wider range of assets than other super funds allow you to, however, there are very strict rules regarding what you can and cannot do with investment properties. For example, the property must be rented at market price and fund members or their relatives are not allowed to live in the property.

My own real estate journey began when I was 28 and purchased a one bedroom unit with a music teacher salary of no more than $70,000 a year. In nearly 20 years, through a lot of hard work and perseverance, I’ve built my portfolio of 18 properties worth $15 million (you can read more about my story in my new book, Buy now). While I still believe that anyone can break into the real estate market with the right strategy, it has become considerably more difficult for this generation to get on the ladder.

So, should you consider using an SMSF to help you buy your first investment property? I’ll discuss some of the pros and cons below so you can make up your own mind about what might be the best outcome for you.


You don’t need to save (that much) for a deposit

As the cost of living continues to rise, people find it increasingly difficult (if not impossible) to save for their first security deposit. Using your super to buy a home could help you get into the real estate market sooner rather than later, giving many young families the extra boost they need to buy their very first home.

Your super is your own money

If you use your super to buy a house, you’re still using your own savings, so you’ll own 100% of your house after the mortgage is paid off. For most people, a home is probably one of the most important financial assets you can own, so this decision will pay off in the long run.

It will set you up for the long haul

Continuing on from my previous point, with real estate values ​​doubling every 10-13 years or so, owning your own home will set you up well for your financial future.


Your Super won’t be the same

Even if you manage to repay the money over time, due to compound interest, your super will not reach the same level as it could have been. However, what you would lose in super potential you should make up for in the value of your investment property, and if you sell the house you can pay the value of the down payment plus capital gains back into your super fund.

You won’t get the diversification

One of the biggest benefits of super is that it is diversified across a range of investments and asset classes, ensuring that if something goes wrong with a specific asset, you don’t lose all your savings. However, when you invest all of your money in one home, you lose that diversification and some of the tax advantages offered by super.

Super probably won’t cover everything

This one depends on how much super you have in your fund. If you’re under 30, your super will probably be enough for a deposit on an entry-level home (if your income can support the downpayments, of course), but it won’t cover all the extra upfront costs like that stamp duty, legal fees and building and pest inspections. If you buy a unit in a building, you will also have to pay condo fees and a condo report.


Ultimately, whether you should use an SMSF to purchase an investment property depends on your personal circumstances, financial priorities, and whether you think it would benefit you in the long run. Buying an investment property or building a portfolio is a dream for many Australians, and with persistence, hard work and the right strategy, it is still possible for ordinary Australians to break into the property market.

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