scott said:
What range would most consider a "neutral geared" property.
Say a property all up costs you $20 per week or you earn $20 per week from the property would you consider it near enough to be neutral?
It's a bit like asking how long a piece of string; it varies with income, tax circumstances, financing method, other commitments, etc.
Acceptable cashflow gains or losses also depends on your strategy (eg yield and/or capital gain). A $20pw ($1040 pa) shortfall should not perturb the growth-focussed investor who watched their property appreciate $10 000 that year. On the other hand it might be a poor result for someone who bought in an area with limited growth prospects and was relying entirely on the positive cashflow to make their money.
Note that circumstances can change as markets do. For instance Steve McKnight's approach was buying positive cashflow in country areas, with the expectation that accumulating heaps of $50 weekly surpluses would provide financial independence. What actually happened was that there was heaps of capital gain in the areas he bought in, so he was soon able to sell IPs in one area and make much more in two year's capital appreciation than in 20 years of cashflow positive yields. What started out as a cashflow strategy became one fuelled by high capital growth.
Income is also important. A shortfall of $20pw (or even $200pw) is trivial for a person on $200k pa with few other commitments. On the other hand it could be a substantial burden for someone on $20k pa.
'Near enough' is something that only you can decide, after consideration of your own circumstances and whether the property's growth prospects outweigh any negative cashflow or opportunity costs.
When would you put your hand on your heart and say this is negativly geared and this is positively geared?
No. You don't know for sure until the financial year is over (unless you've been keeping track more frequently). Even then some urgent repairs and/or vacancy will throw all your figures out and could turn a +ve into a -ve. On the other hand you could get a rent increase that improves the figures.
I think the much more important question is whether the cashflow status of all investments allows one to maintain a growing portfolio, even with risks like loss of job, needed repairs, vacancy, stagnant property values etc.
Peter
