Hi PT_Bear,
I purchased the property for $355,000 and borrowed $319,000. I pay IO $1900 p/m. My income a month is $3600....
I have NO unused cash anywhere
Positive Or Negative Gear??
- Thread starter Happydays
- Start date
Hi PT_Bear,
I purchased the property for $355,000 and borrowed $319,000. I pay IO $1900 p/m. My income a month is $3600....
I have NO unused cash anywhere
Well next time the boss offers you a pay rise, tell him to shove it, cause you'll be paying more tax
.Negatively gearing ONLY works in a rising property market, when the gains are larger than the negatively geared loss. Otherwise you are effectively loosing money on your investment. Not a smart investment is my books.
You hit the nail on the head with this comment, bluestorm. Negative gearing has worked well with residential investment over the past decade or so. But, the boom days are over for now. Cashflow is king......
You hit the nail on the head with this comment, bluestorm. Negative gearing has worked well with residential investment over the past decade or so. But, the boom days are over for now. Cashflow is king......
But how many people out there are like Happydays, negatively gearing in order to reduce the tax they pay. You pay less tax because you are effectively giving yourself a pay cut by negatively gearing (without the benefit of CG with a rising property market).
Cashflow and positively gearing is king in the current market I believe.
Happydays, sounds like you need to learn about what negative gearing is, as some of your posts suggest you think its like the government giving you "free" tax money for you to invest. You pay less tax because you are losing money on the investment, in the hope that CG will be greater than the loss.
In answer to your question, yes, the ultimate idea is to pay off all loans and retire and live off rental income, but in the accumulation phase the idea is not the pay off the loan, but instead use the equity (and cashflow through rising rents) to purchase more property.
Hey..
Thanks everyone for the information.. all been much help..
And yes Bluestorm, I need to learn alot more about lots of aspects of IP's hence why i am on this forum asking questions..
And woppycarly. I have already organised to meet with a broker. Sorry i didn't pick Peter. I decided to go with one who lives in the same state as me..
Again to the people who have answered my questions thank you very much.
To the people who think i shouldn't be doing my research by asking questions on a forum. Ignore my post's...
Cheers,,
Happy Days
Happydays, I suggest that you keep your powder dry for now & do a bit of research and planning. You need to be clear on what your end goal is. How much income do you want in retirement? Say it's $100k. How will you get there? One way is to amass $2m in capital earning 5%. Work out what the figure is (you can always change it) and then start reading. Jan Somers books are a good way to start.
Investing for CG is on the nose around here because the property market is currently in a hiatus. In these times there are more people interested in investing in RE for income. I am not one of them, so let me be a lone voice for investing in property for CG.
I buy & hold growth assets to accumulate capital. RE is my vehicle of choice because the leverage it affords means that I can control a larger asset base. I am also one of the people who still believes that my asset base will double in around 10 years. Even if it is 12 or 13, I will still be waay in front after accounting for the $ that I am paying out. To me, it's always been like enforced savings. However, this strategy requires good cashflow, cash buffers and it's easier if you have a good income. Of course, it's often combined with positive or neutrally geared IPs along the way.
It is true that the tax dep't effectively pays some of the holding costs - but this is not the reason i started investing. The tax implications are a secondary result of the main game.There is always more than one way to the top of the mountain. Take some time to work out which path resonates with you.
Investing for CG is on the nose around here because the property market is currently in a hiatus. In these times there are more people interested in investing in RE for income. I am not one of them, so let me be a lone voice for investing in property for CG.
I buy & hold growth assets to accumulate capital. RE is my vehicle of choice because the leverage it affords means that I can control a larger asset base. I am also one of the people who still believes that my asset base will double in around 10 years. Even if it is 12 or 13, I will still be waay in front after accounting for the $ that I am paying out. To me, it's always been like enforced savings. However, this strategy requires good cashflow, cash buffers and it's easier if you have a good income. Of course, it's often combined with positive or neutrally geared IPs along the way.
It is true that the tax dep't effectively pays some of the holding costs - but this is not the reason i started investing. The tax implications are a secondary result of the main game.There is always more than one way to the top of the mountain. Take some time to work out which path resonates with you.
If someone had a PPOR and an investment property that was neutrally geared, wouldnt it save that person money by refinancing and extracting as much equity out of the IP (and making it negatively geared) and placing that money on the PPOR (where the interest isnt tax deductable)
Have I got that right? isnt that a $$$ saving scenario?
sorry not meant to hijack the thread but i am in this situation. I have 2 IPs and one of them i have to say is the worst performerWell next time the boss offers you a pay rise, tell him to shove it, cause you'll be paying more tax
Negatively gearing ONLY works in a rising property market, when the gains are larger than the negatively geared loss. Otherwise you are effectively loosing money on your investment. Not a smart investment is my books.
paid 340k during the boom (my first one and what a big mistake that one is) and im geared through my last teeth to get that one before. lived in there for 3 years and i moved on and the loan now stands at 315k
the interest alone costed me 22k last year and the rent i am getting only 340 per week. last year i made around 12k after all the fess. i rejected selling it last year when we moved out because we had offer for 330k and yesterday the agent who tried to sell my place before contacted me out of the blue that someone is interested with my place, and ready to buy it for 300k
i am at that junction now, losing 40k right away is alot of money, however negative gearing it at 12k per year loss i will soon see that money slipped away anyway, so should i realise my loss now?
what bluestorm is saying probably hit me the hardest, everyone knows the market is going south, i just cant justify losing money on something that wont grow for next few years
what a headache... wondering if there is anyone in the same situation as me before or now, you know misery loves company
The 'extracted' money would be for personal use. The interest on that drawing would therefore not be be tax deductable. There are ways to capitalise the interest and pay the rent straight into the PPOR account but that's about it.
Gools
No you have not got this right. Refinancing and using the equity on the PPOR (a personal expense) will make those funds non-tax deductable.
i thought if you refinance and use the ppor equity for investment purposes you would still be able to claim the deduction anyway?
oops sorry misread it yeah you are right you cant claim it if you are using it for personal use
Listen to the Somersofters. Hold for long term
Bleed money for another 2-3yrs and then I'll by it when you are finally sick of it in 2014 for a bargin. These are the types of buying opportunities I think we'll see more of in 2013/2014. Like the business owner who holds hoping for good days (rather than cutting the cord), there will be plenty of negatively geared investors who take losses over the next few years who will eventually sell up I think.
Probably many. I love the misery of others who didn't prepare
, sitting nicely on 20% LVR and building up capital for bargin hunting in late 2013/early2014.Ahh ok, thanks for the info!
Property is a long term investment (in most cases anyway). Most definitions of medium term refers to about 5 years and long term comes to 7+ years. Peoples general expectation tend to be that property prices will double every 7-10 years.
The market certainly does appear to be going south at the moment. Most people however are confident that it will bounce back at some point. It might not be next year, but eventually it will bounce back.
If you sell now you would reaslize a $30k loss. If you decide to wait long term, the property might double in value. At this point you need to decide if you think your property will increase in value in the future within an acceptable timeframe.
Personally I don't care that the market is currently dropping. I've owned several properties for over 10 years now. In that time values have gone up and down. They're in good locations and have almost trippled in value since they were purchased. From my long term prespective, some gearing losses and -10% growth are irrelevant.
well thanks for that, good to know someone is gunning for me when i am down, good advice it might be but you dont come across as someone who will genuinely help others when they are in troubleListen to the Somersofters. Hold for long term
These are the types of buying opportunities I think we'll see more of in 2013/2014. Like the business owner who holds hoping for good days (rather than cutting the cord), there will be plenty of negatively geared investors who take losses over the next few years who will eventually sell up I think.
Probably many. I love the misery of others who didn't prepare
I think it's a good idea asking these questions in this forum.
Can I just clarify that looking for a positively geared property is most likely rare and requires a lot of hard work to find, unless somebody is willing to sell their property at more than 50% off the market price or somebody gives you one, then it's definitely positively geared.
Can I just mentioned positive cashflow instead. This means you can still claim the cost (interest, maintenance, etc) of holding on to the property as an investment. It's simply the cost of doing business. It might mean that at the end of the financial year, the total of the the income (rent) and tax deductions that you get back from the government is more than the cost (expenses like interest) hence positive cashflow. Somebody might want to correct me if I'm wrong.
I believe you should be looking at the deal overall and decide whether it's right for you or not. Personally, I would only negative gear on a short term scenario and see if I can add value (possible development, rezoning, etc.) For an investment, it should go from negative gearing to positive within the next 3-4 years or earlier otherwise it's not a good investment. Tax deduction is only part of the big picture and shouldn't be the focus. But this is only my opinion. As you can see from my signature, I'm still learning.
I suggest do a little bit more research, but in the end it's your money and your decision. I hope this helps.
actually i dont think it would go double anymore... i mean it's pretty high price for a duplex as it is so to have that double the value, it would take some serious inflation to happen
i am at this point where i would just cut the cord and realise the loss, just take it that i bought a brand new VW golf or something, but there is another voice in my head to realise that lost in 4 years and see what happens next
Not at all. Just buy in a place where owner-occupiers aren't prepared to buy properties for more money than the rent will cover. They are out there: both of these gross over 7% yield.
http://www.realestate.com.au/property-house-nsw-ashmont-107262962
http://www.realestate.com.au/property-house-nsw-ashmont-107334619
These have been on the market for a while, and there may be a reason so. Consider the area's potential for capital growth.
IMHO the trick is to get cash-flow positive AND good prospects for capital growth.
My current strategy is to look for properties with positive cash flow, good potential for capital growth and the ability to add value in the short term.
Yeah I think looking at the over all picture is important. A good example is a place might cost you $20 a week to hold after ALL goings and 100% finance (if you used equi from another place). Now over all thats pritty dam good! Its 1k neg come tax time, also lets think of buying such places. rent increase wont take long to turn that into a true positive cash flow place and start the snow ball of paying back interest only!
