Reply: 2.1.1.1
From: Sim' Hampel
Why don't we look at this a different way rather than simply rehashing the old +ve vs -ve argument ? Let's look at some facts:
Fact 1. Capital growth is an effective way of building wealth.
Fact 2. Cashflow producing assets are an effective way of increasing lifestyle and/or servicing debt.
Fact 3. Most property in Australia that is likely to see good capital growth is going to cost more to hold than you will receive in rental income - hence it will be cashflow negative (also called negative gearing).
Fact 4. There is a real limit to the amount of growth property you can hold title for, which is determined by the cost of holding them and the cashflow you have available to cover that cost.
Fact 5. One possible means of covering the costs of growth property is to purchase assets which provide you with cashflow, such as cashflow positive properties, businesses, shares and so on. Growth assets and cashflow assets can both be used in your portfolio - you do not have to choose between one or the other.
Fact 6. It is possible to find property that is both cashflow positive and experiences decent capital growth. You may have to look hard for it though.
Fact 7. It is possible to turn a cashflow negative property into a cashflow positive one using techniques such as adding value by renovation.
Fact 8. It is possible to invent capital gains by using techniques such as buying below value and/or adding value by renovation or subdivision.
Fact 9. There are as many ways to successfully invest in property as there are property investors. Find a way that suits you.
Fact 10. The strategy called "negative gearing" is a tax minimisation strategy. The strategy called "buying for growth" is a wealth building strategy. These two strategies look very similar to the untrained eye.
Fact 11. You can increase your wealth by minimising your tax. You can also increase it by spending less time worrying about the amount of tax you pay (let your accountant do that for you), and concentrating instead on increasing your wealth by investing wisely. Don't lose sight of why you are investing by concentrating too much on tax.
Fact 12. Too many people mistake fact for opinion.
Fact 13. I could be wrong about many things.
Fact 14. There is nothing new. It has all been done before in one form or another.
Fact 15. Some people fall asleep before they reach the end of my posts.