definition of +geared V's +cashflow

[maadha]

Hi,

Im a total newbie but have heard two terms, Positive geared and Positive Cashflow real estate. Is there a difference and if so can someone please explain.

Also, I would like some opinions on whether it is better to by your primary place of residence first before venturing into investment properties. Has anyone done it the other way around and would they do it again given the chance.

Thank you...
Maadha

[Les]

G'day Maadha,

This link gives my views from about 5 years back - can't say I've changed my mind much over that time either. Hope it helps...
http://www.somersoft.com/forums/showthread.php?t=4635

Re +ve cashflow vs +ve gearing - well, I reckon gearing is how a loan starts off (if +ve, then Income exceeds all costs of borrowing and maintenance) - and +ve cashflow is a given if you are +ve geared.

BUT, even a -ve geared property can end up with +ve cashflow (if you have a good wage, and can claim a lot of deductions). I've heard others have different views of these meanings, and I'm certainly not an oracle - but the above make sense to me.

Regards,

[Merovingian]

Margaret Lomas defines these two terms quite distinctly in her books.

She states that a positively geared property is one where the rental income exceeds all expenses for a particular property. Thus, you get taxed on the profit you make from the property each week.

A positive cash flow property is one where the rental income does not exceed all expenses, but using on-paper deductions like depreciation and special building write-off, actually offsets this loss, giving you a profit each week.

Hope that helps. :)

[ralph wiggum]

Also, I would like some opinions on whether it is better to by your primary place of residence first before venturing into investment properties. Has anyone done it the other way around and would they do it again given the chance.
Maadha
Hey Maadha
I have 4 IPs but no PPOR. I live in the Eastern Suburbs of Sydney, and can't afford properties here, so I have gone elsewhere to buy IPs that I can afford, and I rent ATM. I have no problems with this approach, and will probably at some stage move out of Sydney and live in one of my IPs down the track. The more I can accumulate in the coming years, the more choices I will have on where to live in the future - Cairns, or Coffs, or Perth etc etc :)