Why negative gearing sucks!

[Nathan]

I have had quiet a few people write to me of late asking about off the plan properties in regional towns and other negative gearing questions.

I thought I would chat about it on a video blog the other day. This kind of ties also into the how come most investors buy only 2 or 3 investment properties.

No reason other then just discussing my views - Enjoy!

http://www.youtube.com/watch?v=r43RnOdquMM

 

[burty85]

Nathan,

What would be your min return for an IP, ie in %


Cheers,


Luke

 

[Nathan]

Depends what its doing for me...

If its $30 - $60k below market value, 7% is ok. Depends if it needs work or no work or if its new or old, what com parables are selling for.

Minimum personally is 7% + buying below market value of say $30 - $60k. In metro this is.

 

[Lofty]

Hi Nathan

The bit I really enjoyed was the "treat it as a business that has to make a profit" concept. Thanks.

Cheers, Paul

 

[Felixter]

asking about off the plan properties in regional towns and other negative gearing questions.

Question: Why are you linking off the plan to -ve gearing?

-ve gearing is no more relevant to off the plan than +ve gearing. There is no real link.

 

[HomePage]

Question: Why are you linking off the plan to -ve gearing?

-ve gearing is no more relevant to off the plan than +ve gearing. There is no real link.

Perhaps because off the plan properties have much lower yields than do the types of existing properties that Nathan buys, hence they are far more likely to be in -ve gearing territory.

 

[MIW]

Property trader rather than -VE gearing discussion

I have had quiet a few people write to me of late asking about off the plan properties in regional towns and other negative gearing questions.

I thought I would chat about it on a video blog the other day. This kind of ties also into the how come most investors buy only 2 or 3 investment properties.

No reason other then just discussing my views - Enjoy!

http://www.youtube.com/watch?v=r43RnOdquMM

What ambigious, biased and self vested interest video! What I took out of your video:
- You are are second hand, IP trader (buying selling etc...) for profit income (not capital growth), in regional areas, you buy and renovate and sell, perhaps positive cash flow (+CF) since you dislike -ve gearing.
Any investments you didn't make a profit on? I was thinking that since most share traders never ever make profit only!
Negative gearing had nothing to do with your presentation so it was very unfair. You can be negatively geared yet have positive cash flow based on your depreciation.
What has a suit to do with flip/flops?

Well, my strategy is totally opposite to yours: buy to never sell, never to invest into regional areas (as I am looking long term), don't care if they are negative of positive if the deal and the property and location is good - sound investment) for capital growth (not just income/profit) plus eventually they will become positively geared).
I have heaps of reasons why new but that's another conversation.
One word of advice, perhaps you could advocate your investment strategy at the beginning and the sale information, so I investors like me can stay out of it.

 

[jingo]

What ambigious, biased and self vested interest video! What I took out of your video:
- You are are second hand, IP trader (buying selling etc...) for profit income (not capital growth), in regional areas, you buy and renovate and sell, perhaps positive cash flow (+CF) since you dislike -ve gearing.
Any investments you didn't make a profit on? I was thinking that since most share traders never ever make profit only!
Negative gearing had nothing to do with your presentation so it was very unfair. You can be negatively geared yet have positive cash flow based on your depreciation.
What has a suit to do with flip/flops?

Well, my strategy is totally opposite to yours: buy to never sell, never to invest into regional areas (as I am looking long term), don't care if they are negative of positive if the deal and the property and location is good - sound investment) for capital growth (not just income/profit) plus eventually they will become positively geared).
I have heaps of reasons why new but that's another conversation.
One word of advice, perhaps you could advocate your investment strategy at the beginning and the sale information, so I investors like me can stay out of it.

That's a bit harsh, MIW,

Nathan has been a valued member of this forum for a long time now. His strategy has enabled him to reach financial freedom very quickly.

Is there anything in the investment bible to say that the buy and hold, negatively geared scenario is the best way to reach financial freedom? For what it's worth, I think being negatively geared hinders your options and is reliant on capital growth.

Nathan is still using property to reach his investment goals - just in a different way to you, and dare I suggest, probably in a far smarter way!

Not sure of your issue here!

 

[JWR]

I really don't think he is trying to be bias and ambiguous etc... he is trying to help everyone as I'm sure he received help too when he was starting out. Nathan is not in it for flips - he just does this when the deal is too good not to flip. He mostly buys and holds forever - however they are generally positively geared or cashflow so as to not detract from his lifestyle.

I am just speculating here - but I think one of the reasons he flips some of these houses is because they are in areas where he deems the prospects are not great. So by buying for $50k then selling for $100k in a month in an area not likely to grow, he can use the profits for deposits into areas he thinks will grow. He is a good guy. I have met him a couple of times and he is both genuine and very knowledgeable. I don't think he is trying to pull one over you MIW; just trying to help the average investor who cannot afford the holding costs of multiple negatively geared properties - and everyone else in the process. If you watch his other youtube videos you will understand.

 

[Nathan]

Thanks for the feedback everyone.

As for your comments MIW, really I got no interest in talking anything up except how I do it.

By the way, I made my first million in Mount Druitt (Western Sydney) at age 21, I started to buy regional just for the kicks of it and spread some risk and I don't advocate buying regional. I advocate on buying numbers which work.

I am glad you are happy losing money each week and having offset from depreciation. Tell me if you were to leave your job what good would your tax credits be?

I have around $150,000 depreciation schedules per year buying second hand property and most being metro buy and hold never sell properties I have accumulated over the years. These are a bonus, I don't use them as any foundation of investing.

I am not a property trader, I buy and hold with an occasional sell. I sold some recently as I shot some dogs, and used the funds to invest in unit blocks I have purchased of recent times.

Buy and hold is my strategy and I hold 40 properties give or take a few.

This video was just a simple way to highlight people don't get rich from negative gearing, you create wealth from investing in property which makes finical sense and not a buy, hold and pray approach. Buying something cheap, or with a good yield and of course strong growth prospects is the key to building a strong sustainable portfolio.

Sure how can a $200,000 property in sydney go up? Well what is easier? a $200,000 property in western sydney going from $200,000 - $400,000 or a $2,000,000 property in mosman going to $4,000,000? One needs to go up $200,000 one needs to go up $2,000,000.. It is all relevant...

Some will get what I am trying to say and some won't, I will respect that but I do get a little touchy with acquisitions being thrown my way.

Not going to hold any grudges

Chat soon,
Nath.

 

[devank]

Thanks for sharing Nathan. I'm waiting for your next Parra workshop

If its $30 - $60k below market value,

Generally you buy lower valued properties. That means 30-60K below the market value must be a significant percentage of the value of the house.
If that is the case then how come other buyers are not seeing it?
To buy one property,
- How many properties do you inspect?
- How many properties do you activley negociate?

 

[RedCat]

Hey Nathan. Glad your strategy is working for you. In fact it probably works for a good majority of people but that doesn't mean negative gearing sucks. Some people have decent paying jobs they WANT to keep working in, and negative gearing during their working years is a great way to enjoy that capital growth in retirement.

Like MIW, I too am happy to sit on a smaller number of inner city quality properties for years and years. In fact my next crappy costly negative growth inner city property is hopefully just a couple of weeks away. I did look into the regional stuff, but it gave me the shivers. Different strokes for different folks.

Maybe instead of your post stating "negative gearing sucks" it could have said "why buying burnt down wrecks can work for you" because it sure doesn't work for everyone and to assume it does is a bit short sighted.

 

[VYBerlinaV8]

I think we're reading too much into this. Nathan has his strategies and opinions, and they seem to have worked for him, and that's great. I don't invest the same the way Nathan does, and I think that's fine too.

There's nothing wrong with people putting up their opinions and ideas, and we are free to read/watch, think about it, and do what we will with the information.

My opinion, FWIW, is that growth potential and positive cashflow don't have to be mortal enemies, and that negative gearing is just a buzzword devised by financial planners.

I doubt I'm as wealthy as Nathan, and that's fine with me. Given his apparent wealth now, good on him.

 

[Melbournian]

I think we're reading too much into this. Nathan has his strategies and opinions, and they seem to have worked for him, and that's great. I don't invest the same the way Nathan does, and I think that's fine too.

There's nothing wrong with people putting up their opinions and ideas, and we are free to read/watch, think about it, and do what we will with the information.

My opinion, FWIW, is that growth potential and positive cashflow don't have to be mortal enemies, and that negative gearing is just a buzzword devised by financial planners.

I doubt I'm as wealthy as Nathan, and that's fine with me. Given his apparent wealth now, good on him.

weren't you the IT contractor in canberra racking in 1k a day?
i think you're worth more actually.

 

[HomePage]

weren't you the IT contractor in canberra racking in 1k a day?
i think you're worth more actually.

---------------------------------------------------
"Being rich is having money, being wealthy is having time"
- Margaret Bonnano

Per your signature line, it sounds like Nathan is more rich than wealthy at the moment. But he is young so there is plenty of time for him to achieve true wealth.

 

[Dazz]

Maybe instead of your post stating "negative gearing sucks" it could have said "why buying burnt down wrecks can work for you"

There's almost nothing worse than someone trying to PC what you wanted to say.

I agree Nathan, negative gearing sux - big time !!!

it sure doesn't work for everyone and to assume it does is a bit short sighted.

As Nathan stated previously, he doesn't invest in regionals or wrecks....he invests in properties where "the numbers work". Numbers do work for everyone. They don't care what your personality or job description or lifestyle position is.

To assume numbers don't work is very short sighted.

Australians never cease to amaze me. Wannabe part time amateurs with 4 IPs reckon they know more and are in a strong position and have a justifable right to criticise someone who is a full time professional with 40 IPs.

The runs are clearly on the board.....philosophical wafty theories be buggered. I know it's all PC to say "it depends on your personal circumstances", but I clearly don't subscribe to that rubbish.

Your chosen investment method Redcat, when compared to Nathans is demonstrably inferior - let's call a spade a shovel.

 

[cu@thetop]

There's almost nothing worse than someone trying to PC what you wanted to say.

I agree Nathan, negative gearing sux - big time !!!




As Nathan stated previously, he doesn't invest in regionals or wrecks....he invests in properties where "the numbers work". Numbers do work for everyone. They don't care what your personality or job description or lifestyle position is.

To assume numbers don't work is very short sighted.

Australians never cease to amaze me. Wannabe part time amateurs with 4 IPs reckon they know more and are in a strong position and have a justifable right to criticise someone who is a full time professional with 40 IPs.

The runs are clearly on the board.....philosophical wafty theories be buggered. I know it's all PC to say "it depends on your personal circumstances", but I clearly don't subscribe to that rubbish.

Your chosen investment method Redcat, when compared to Nathans is demonstrably inferior - let's call a spade a shovel.

What percentage return do you aim for in your investments Dazz?

 

[Dazz]

What percentage return do you aim for in your investments Dazz?

Dunno - by the current Labor Govt definition, I think anything over the long term bond rate is deemed to be a "super profit".

 

[Melbournian]

true there is the young factor to add to the equation.

 

[Fifth]

Why do negative gearers get so defensive?

Anyway, while they're twiddling their thumbs and readjusting their twigs n berries waiting for CG boom times, Nathan's portfolio is growing exponentially.

Oh, but they want to keep working their day job. Silly me.