Panic said:
1. BS. As long as you hold negative geared property with no chance of CG in the near future you lose money on daily bases. REAL MONEY, out of your pocket!
1.a. You do not make money until you sell, all you have is "paper gain"
3. Any market being stock, property, flee, fruit, etc, operates on fundamentals of which supply and demand are the most important.
Thx
V
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Dear Panic,
1. You says, "As long as you hold negative geared property with no chance of CG in the near future you lose money on daily bases. REAL MONEY, out of your pocket!"
2. Can I ask you what is the time frame which you are referring to?...at the end of another new property cycle some 7-10 years subsequently?
3. And how much monies is the so called "loss" that you are talking about, after deducting out all the tax benefits accrueing from holding onto the same properties? Please note that the "paper loss" suffered is not compounding perpetually on an indefinite basis.
4. The only real big money that GeorgeSA will immediately lose is the actual price difference which he is going to experience by selling his property "inappropriately" on the "wrong" side of the present property cycle, the selling costs incurred (as well as his future new buying costs and stamp duties payable as well ) and also the amount of taxes that he is going to pay on his income without a negative geared property, year after year, if he sells off his property now and fails to get into another one. Not to mention the depreciation benefits and other tax benefits that he is going to lose too immediately when he sells away his property now.
5. Give a choice, do you prefer to continue paying interest at 7%p.a or to pay taxes at 47.5% p.a on your income?
6. Over time, the same property which has suffered a "paper loss" can also earn a "paper profit" which can then be realised into a real cash profit at the more opportune time at a later stage, should one/GeorgeSA wants do. I speak as one who has been through the unfortunate experience of riding the up-down-up roller-coaster ride myself, in the changes of the median house prices across time, from 1993-2003 period in the Goldcoast property market.
Instead of losing real monies eventually, each of my 2 "loss-making" properties eventually turnaround after one property cycle and make some $100,000 worth of non-taxable cash profit each when I eventually sold them off in November 2002 and August 2003 respectively. Said what you like, these are real monies profits from the actual property sales;- though some critics may argue that it is actually my own "enforced savings" paid on the property portfolio in the past... Whatever is being said, nothing is comparable than my good feeling of being able to have this sudden "$200,000" cash (non-taxable) windfall, after 7 years of patient waiting out for the new porperty cycle to arrive.
7. Thus, one thing that I have learnt from my own experience is that it is not the property per se that actually cause one to lose/make monies, rather it is the "timing" when one chooses/decides to enter and exit the market that will determine its outcome.
8. Thus, "TIME" rather than "TIMING" is the main key single wealth creation factors in property investing and TIME, (rather than timing) can be forgiving of one investing mistakes over time, as suggested by Jan Somers.
9. Personally I do not think that the market is "obliged" to help you or GeorgeSA or anyone else for that matter, to make monies with a second new property investment, all things being equal. So why are you so sure that you or GeorgeSA will surely make monies in the same declining Sydney property market, a second time round?
10. Normally, we only sell the properties to realise our paper profits;- not to realise our paper loss unless we truly have NO choice of holding on to the assets which may appears to suffer some paper loss for the time being.
11. Having said all this, If GeorgeSA still chooses to sell ultimately as he has now, ( whatever his reasons, whether he is in fact more comfortable with this decision outcome or not), I will still respect GeorgeSA and his decision.
12. It is after all, his call and his monies;- not mine nor yours either.
13. Thank you.
regards,
Kenneth KOH
