The investors who dump the properties would be those few who can't sustain the neg cashflow the tax breaks were underpinning.
The cashed-up, low LVR investors would move in and buy up the ashes.
Stats: 74% of Property Investores Are Low-Med Income Earners
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The investors who dump the properties would be those few who can't sustain the neg cashflow the tax breaks were underpinning.
The cashed-up, low LVR investors would move in and buy up the ashes.
Impossible to say. We don't know what would have happened to rents during that period if NG had not been removed. Maybe in the cities where rents went down, they would have gone down by even more had NG not been removed.
Perhaps a poll thread is needed: Would you slam your rents up to offset any reduction in NG allowances?
If landlords thought there was room to move their rents higher, why wouldn't they do it now without the change to negative gearing?
The poll would be meaningless.
I think that some of these "investors" don't want to raise rent because then they have to pay tax. They think it much more important to reduce tax and beat the tax man. That's how winners think, they think.
Not so if ALL landlords raised rents at the same time. Now did you think of that?
I lol'd, but then I gave a second thought there's no doubt in my mind that there are some out there who really do think that way. Went from funny to scary.I think that some of these "investors" don't want to raise rent because then they have to pay tax. They think it much more important to reduce tax and beat the tax man. That's how winners think, they think.
Can you share your thoughts on the co-ordination of such a plan? I am intrigued.
My story is not just anecdotal, I know two people who have done this, so the practice must be widespread.
I just did my tax (personal & FT) for the 10/11 year through my accountant and he followed up with a letter asking for a friendly chat in ways to reduce tax. Guess what one of the things he mentioned? You guessed it, purchase a property that you can NG to massively reduce your tax.
Now, I'm all for looking at ways to reduce tax with non-cash costs, but to go out of our way and purposely lose money to reduce tax is just crazy talk.
None needed. The moment NG allowances are cut each landlord acting alone will respond logically by restoring their net yeild to its former level by increasing rents. I know I would. Instantly. And many here reckon I'm a raving commie. God only knows what else they'll add to their response. Punishment surcharges in all likelihood!
If it was so easy why don't landlords just push up their yield now by putting up rents?
Simple. They have no incentive to do it all at once. But reduce NG allowances, and they will. See?
So in other words you and every other property investor out there think exactly like the chap in HotRod's post?
Not interested in increasing income (apparently that's not an incentive!), only interested in reducing tax benefits. Scary.
I think that some of these "investors" don't want to raise rent because then they have to pay tax. They think it much more important to reduce tax and beat the tax man. That's how winners think, they think.
A while ago there was a thread in the coffee lounge. I can't remember the exact details, but one member's strategy was to pay off her IPs as quickly as possible and retire on rental income. She got a lot of snide comments and a lot of "but then you'd have to pay TAX" gasps. Some members seem to think paying tax is the worse than watching an Oprah marathon whilst having your eyes gouged out with an icecream scoop.
Using their logic, a lawyer would be better off quitting their job to work at Hungry Jack's because burger flippers pay less tax and are thus beating the system.
High income + pay more tax versus lower income + pay less tax... hmm... let me think about that...
Exactly. Truth is, there isn't much room for rent to move in a lot of areas. The poorer areas have been flooded with investors, glut of properties, high vacancy rates, tricky to raise rents when there are 10 houses in the street being offered for less. The snazzier inner city areas have hit a bit of a ceiling. There is a limit to how much aspiring yuppies will spend on a shoebox barely big enough to drown a cat.
That is the most uninteresting response to the issue under discussion one could imagine.
Instead of finding flaw in my argument's logic, you look to find flaw in my personal motives.
I can only leave it to others to draw their own conclusions as to your motives.
Not really. If costs could always be passed on to consumers businesses would be a lot more profitable.
Know what a business cartel is, Tom? Well, you tell me what competition landlords have. (Hint: You can't offshore accomodation.)
You mean the ruthless cartel that has such clout that the yields on their investments often don't exceed the return offered on risk free term desposits?
Correct. It's not a cartel. But reduce NG allowances and it will respond uniformly. With nowhere else to go, renters will experience this as cartel-like behaviour. Don't you see?
You make it sound like there is only one way that yields can improve.
Situation: Negative gearing removed.
Belbo says: All landlords increase their rents in unison.
I would suggest a more likely outcome is that most property investors try and flee the market. With an already elevated amount of housing stock for sale they will be forced to leap frog eachother and accept lower prices, falling prices which will in turn increase the yields (for new buyers) without the need for rents to rise.
With 1 in 11 tax payers (e.g. a majority of property investors) owning a negatively geared property I would liken this group not to a cartel (which indicates a small, sophisticated and powerful group), but to a flock of lemmings who will exit the market should anything disrupt their precious tax reducing property "investment".
And there we have the truth of the matter, people. Hobo Jo is just here to troll. That's all folks!