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From: Mike .


I need advice re. negative gearing
From: Robert H. (Newcastle)
Date: 10 Nov 2000
Time: 14:50:17

Hi! I am lucky enough to own a terraced cottage in Erskineville (Sydney) probably worth around $240,000. I bought in 1983 and have seen the price increase to my advantage.

Now I find myself working in Newcastle and renting an apartment for $200/week. A friend pays me a nominal rent for the house in Sydney ($100/week) I cannot afford this situation to continue past Feb next year.

I have enough for a deposit on a property ($20,000), but can't decide whether I should rent out the property in Sydney and buy in Newcastle, or should I sell Sydney, buy something smaller in Sydney, and get a mortgage and rent it out and also get a mortgage for a property in Newcastle and live in it myself?

How does the negative gearing work?? If I rent out the house in Sydney I will have to spend about $6000 to upgrade.

I need advice!! THANKS
 
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Robert Forward

Reply: 1
From: Mike .


I'll Lease Option it from you!!!
From: Robert
Date: 10 Nov 2000
Time: 19:47:49

G'day Robert

This is other Robert here, I'll offer you a lease option subject to inspection. I will pay $200pw in rent (of which a portion comes off as a deposit). And we can have this lease option for any period 1yr-3yrs-5yrs etc.

Email me Robert_Forward@optusnet.com.au I look forward to hearing from you.

Cheers, Robert
 
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Owen

Reply: 1.1
From: Mike .


Re: I need advice re. negative gearing
From: Owen
Date: 10 Nov 2000
Time: 15:40:11

Hi Robert,

Not really advice but if do decide to sell your house in Erko for $240K let me know. I'll buy it off you. Email me if your interested.

Owen mandos@one.net.au
 
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Pierre

Reply: 1.1.1
From: Mike .


Re: I need advice re. negative gearing
From: Pierre
Date: 10 Nov 2000
Time: 18:31:43

Robert,

First piece of advice - read all the posts on this page and then access the archive page and read everything there. It will take you hours, but there is an unbelievable amount of information there and you will be far wiser after the read.

What I think Owen is trying to say is that your Erski terrace is probably worth a wee bit more than $240K. Have a look in the Sydney papers for similar properties. Watch the Hot Auctions show on 7 or the other property show on 9 - Wednesday nights. Get a valuation done !!! I checked a couple of property websites and most houses seem to be on the market for around the $290K to $500K in that area.

Now, rent for the property should be a lot more than $100 per week. Firstly, Mr Tax man won't like you only charging your mate $100 per week and then claiming full deductions. Get a rental appraisal done. Somewhere around $250 - $500 per week that close to the CBD might do the trick - all depends on the property.

I'm in Newcastle and love it. Property is pretty cheap to buy in most areas and you can get some excellent returns if you know where to look.

I tell you what - drop me an email at pnoake@hunterlink.net.au and I'll phone you. We can discuss this much easier than describing it all here.

I'll hear from you soon,

Pierre
 
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Owen

Reply: 1.1.1.1
From: Mike .


Re: I need advice re. negative gearing
From: Owen
Date: 13 Nov 2000
Time: 09:11:03

Thanks for tipping him off Pierre. Though I was on a deal of a lifetime - oh that's right. They come around every month don't they.

You are right though. A tiny 1br terrace next door to me went for $255K last November so $240K for just about anything would be a bargain. Get proper valuations done and get that good rent happening too. Your numbers will change dramatically and your ideas and plans will too.
 
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Jeremy

Reply: 1.1.1.1.1
From: Mike .


Re: I need advice re. negative gearing
From: Jeremy
Date: 11 Nov 2000
Time: 17:42:56

Re Erskineville. Do NOT, repeat do NOT sell!

Have you considered doing a renovation including an attic room? Done properly it would probably cost around $100k then you have a brand new property (depreciable)that would rent for at least (worst case) $350-$400/wk. As it's pre GST you would be better off with the increase after reno (most probably).

3 years ago I bought a 3 bedda 2 storey terrace in Redfern for $390k and a single storey terrace for 320k The single storey with attic addition would be worth $450k and rent $500/wk. Cost to put the room in the roof about $50-60k. The 3 bedder (now 3 storey, 4-5 beds reno about 200k) worth around $750k and rental $850 week.

My guess is you are at least $80-$100k off in your valuation estimate. It's been a while since I looked at Erskinville, but it is a very good suburb. Character suburbs like that are VERY hard to find. Do not let your $100/wk tennant stay - he's killing you!

You have a property 10 minutes away from where Tom Cruise goes to work, don't give it away! They are gold! Get a loan renovate _properly_ it should be able to just about totally pay for your loan to buy a house in Newcastle.
 
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china

Reply: 1.1.1.1.1.1
From: Mike .


Re: I need advice re. negative gearing
From: china
Date: 11 Nov 2000
Time: 19:28:01

Robert H, Please listen to Jeremy. I was left a 1/3rd share in a house in Macdonaldtown right near ERKO" in 1977 , we HAD to sell it in 1978. We were paid $22ks then , how much do you think it's worth today???????,HEAPS ! I realise that it may have been a fare price at the time , but then i wasn't aware of how to go about property investing, or how it all worked .

I wish I had read a Jan Somers book then, instead of waiting till 1996 ! This is the 1st article I've posted and I am pretty new to property investing ,( I have 4 small IPs ) but this forum is TERRIFIC. I've been looking at this sight for a good while now and believe there are some VERY CLEVER individuals posting articles . DO YOURSELF A FAVOUR & LISTEN TO THESE VERY, IN-TUNE PROPERTY INVESTER'S

Regards, China.
 
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MaryC

Reply: 1.1.1.1.1.1.1
From: Mike .


Re: I need advice re. negative gearing
From: MaryC
Date: 28 Nov 2000
Time: 21:45:45

negative gearing - according to John Burley and many other people "in the know" should never ever ever ever ever be done. It will lose you MONEY every time. It is based on probable appreciation of your property and what they call YIELD which is an intangible. I don't fully understand it, but it does take money out of your pocket.

So if you have money to give away - send it this way.

Regards, Mary
 
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