December 14, 2018 Pat Mannix

How Much Can I Save By Purchasing Property In A SMSF?

Pat Mannix

Pat Mannix

Partner
Pat Mannix champions small business people. Owning and running his own financial services firm for over 20 years, Pat is an expert in small business tax, property investors and high net worth families via trust structures and SMSF's.

Quite a few years ago, I did some calculations on having a geared property within super versus a market linked ungeared fund portfolio.

I ran a model where I kept the parameters of the returns both from a capital perspective and a revenue perspective on the property and the managed fund the same. Essentially I wanted to match apples with apples.

 

So what was better:

A geared property with a SMSF loan.

VS

A non-geared, market linked managed fund.

 

I ran the model on the below basic assumptions:

  • 3% revenue return on the managed fund
  • 3% rental yield on the property
  • 6-7% compound capital growth over those portfolios over a 10 and a 20 year period

 

With the power of lending and the power of tax benefits within a self managed super fund, I realised you are going to end up about a third better off if you choose to purchase property in a SMSF.

33.3% better off.

That’s huge.

Admittedly, there are all sorts of assumptions in there. The main assumption is that you’ve bought the right property that will give you at least a 3% yield every year and 7% compound capital growth.

But if you’re capable of getting that right property, you can be 33.3% better off.

 

This is not advice or official statistics – I’m musing as the man in the street with a little bit of tax knowledge chucked in.

What you need to do is talk to your lender, your financial advisor, and your tax accountant if you are even contemplating such a transaction with your retirement savings.

I’m just relaying the numbers I’ve done calcs on.

Pat Mannix

Pat Mannix

Partner
Pat Mannix champions small business people. Owning and running his own financial services firm for over 20 years, Pat is an expert in small business tax, property investors and high net worth families via trust structures and SMSF's.

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