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  1. #51
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    I have never thought the top 1% of earners are the only ones buying property. In fact, I'd be very surprised if they're buying a property here and there.

    I don't get why people buy an investment property to get rid of it in 5 years. How is that setting you up for retirement? It's quite clear that people doing it that way are only doing it to reduce their taxable income.

    My husband and I want to buy property for our kids' future, not to get out of paying tax.

    If we did get approved for the cheap apartment it would most likely have been positively geared anyway.

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  3. #52
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    Quote Originally Posted by BigRedV View Post
    I don't get why people buy an investment property to get rid of it in 5 years. How is that setting you up for retirement? It's quite clear that people doing it that way are only doing it to reduce their taxable income.
    Buy, subdivide and build 2 (or renovate), rent, sell for a profit, use said profit to pay off chunk off owner occupied house, rinse and repeat however many times necessary to own their owner occupied house outright, so that the money previously paid into the mortgage is now being put into savings for retirement and or kids.

    It's not about getting out of paying tax, investors still pay it but at a reduced rate. As I said, investors also pay stamp duty and land tax.

  4. #53
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    Quote Originally Posted by A-Squared View Post
    Buy, subdivide and build 2 (or renovate), rent, sell for a profit, use said profit to pay off chunk off owner occupied house, rinse and repeat however many times necessary to own their owner occupied house outright, so that the money previously paid into the mortgage is now being put into savings for retirement and or kids.

    It's not about getting out of paying tax, investors still pay it but at a reduced rate. As I said, investors also pay stamp duty and land tax.
    Exactly. When we bought our property, we didn't think "oh yay now we get to avoid tax". We thought "what a great way to invest in our future, not have to rely on the government for a pension that might not even be around when we retire and worry whether we will have enough in our superannuation...and we have the added bonus of living comfortably and providing a financially stable home for our kids. Plus they get a decent inheritance". We're not cheating the government. We do pay our taxes. We chose property to invest in because we saw growth there. There was nothing sinister about our thought process and I'm sure a lot of others have done it for the same/similar reasons.

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    Quote Originally Posted by hopeful1986 View Post
    Exactly. When we bought our property, we didn't think "oh yay now we get to avoid tax". We thought "what a great way to invest in our future, not have to rely on the government for a pension that might not even be around when we retire and worry whether we will have enough in our superannuation...and we have the added bonus of living comfortably and providing a financially stable home for our kids. Plus they get a decent inheritance". We're not cheating the government. We do pay our taxes. We chose property to invest in because we saw growth there. There was nothing sinister about our thought process and I'm sure a lot of others have done it for the same/similar reasons.
    Yes this is very true. And to have these properties loose a lot of value due to property prices taking a big hit will have negative impacts for a lot of people who were doing nothing but trying to provide for their future.

    The more I think about this the more I support a big increase in the first home buyers grant and for negative gearing and capital gains tax to stay as they are.

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  8. #55
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    Default Negative Gearing - Politics talk

    Buying and selling property every 5 years... What an expensive exercise! Stamp duty alone would eat a huge chunk of your profit, as well as real estate agent commission..

    I don't come across many people who do that, and I deal with a lot of property owners. The main reason people buy and sell is if they are upgrading or downgrading their home, in which case they are not investment property owners in any case. There are always exceptions and people have all sorts of different circumstances.. Buying vacant blocks of land and developing and subdividing.. Hmmm not in Sydney I'm afraid to say. Also most people are not inclined to invest their time and energies.

    Also, $80k income is a decent amount to be earning if you want to buy an investment property. The bank evaluates your borrowing capacity based on the fact that you will be receiving rental income. In fact, most people with investment properties are middle income earners, and most people don't make huge negative losses. When there are large losses, it is mainly due to depreciation. This is especially true in the current economic climate with interest rates being at a record low and rent being at a record high.

    My point is, investment properties are actually affordable if you're smart about it, and if you are good at saving a deposit. You don't need to be rolling in money to buy a property. If you're trying to buy a family home on the other hand, that could be difficult, especially for first home buyers. There's definitely something wrong with the market.

    The elephant in the room which the government doesn't want to acknowledge at all, is that people are waaaaaay over their heads in debt. That's all fine right now while rates are low, but once they start to rise, people will not be able to afford to pay their loans and there will be a significant market adjustment. Maybe rather than making big changes to negative gearing, the government should force banks to be stricter with lending?

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    Quote Originally Posted by witherwings View Post
    Buying and selling property every 5 years... What an expensive exercise! Stamp duty alone would eat a huge chunk of your profit, as well as real estate agent commission..

    I don't come across many people who do that, and I deal with a lot of property owners. The main reason people buy and sell is if they are upgrading or downgrading their home, in which case they are not investment property owners in any case. There are always exceptions and people have all sorts of different circumstances.. Buying vacant blocks of land and developing and subdividing.. Hmmm not in Sydney I'm afraid to say. Also most people are not inclined to invest their time and energies.

    Also, $80k income is a decent amount to be earning if you want to buy an investment property. The bank evaluates your borrowing capacity based on the fact that you will be receiving rental income. In fact, most people with investment properties are middle income earners, and most people don't make huge negative losses. When there are large losses, it is mainly due to depreciation. This is especially true in the current economic climate with interest rates being at a record low and rent being at a record high.

    My point is, investment properties are actually affordable if you're smart about it, and if you are good at saving a deposit. You don't need to be rolling in money to buy a property. If you're trying to buy a family home on the other hand, that could be difficult, especially for first home buyers. There's definitely something wrong with the market.

    The elephant in the room which the government doesn't want to acknowledge at all, is that people are waaaaaay over their heads in debt. That's all fine right now while rates are low, but once they start to rise, people will not be able to afford to pay their loans and there will be a significant market adjustment. Maybe rather than making big changes to negative gearing, the government should force banks to be stricter with lending?
    I think we generally agree. In Adelaide subdivision is very common. But as I mentioned renovating can also add capital to a property. This is important in markets like Adelaide where growth rates are lower. Stamp duty does cut into profits a lot but if you are building or renovating once you lose the benefit of depreciation, it makes sense to sell up, but something cheaper that needs work or can be subdivided and away you go.

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    Not to mention the loss in paying interest for the months of renovating/building that needs to be done. The potential losses can be quite scary and I'd say many many people would avoid going down the route.

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    Quote Originally Posted by hopeful1986 View Post
    Exactly. When we bought our property, we didn't think "oh yay now we get to avoid tax". We thought "what a great way to invest in our future, not have to rely on the government for a pension that might not even be around when we retire and worry whether we will have enough in our superannuation...and we have the added bonus of living comfortably and providing a financially stable home for our kids. Plus they get a decent inheritance". We're not cheating the government. We do pay our taxes. We chose property to invest in because we saw growth there. There was nothing sinister about our thought process and I'm sure a lot of others have done it for the same/similar reasons.
    Thank you ladies for writing this. This is what it is for me and hubby. We just want to save for our retirement and hopefully help our kids enter the housing market. It's not about cheating the system. It's about being smart and making some money. Which is all what we want right?

    I bought my investment property at 24, single, with a little bit of savings (I was on around $40k at the time), had the 1st home buyers grant and bought a brand new house in a cheaper area so as not to over extend myself. I neg geared to help me save up for a 2nd property which ended up being our family home.
    It was the best thing I ever did although I went without on other stuff.

    It helped me and hubby buy our home now and although we don't have the house any longer, I'd do it again and again in the hope that I could live without having to rely on the pension to fund my retirement & help my kids set themselves up as well.

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  14. #59
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    I support a reduction or revision of negative gearing because other than to give individuals tax concessions, it's done little to do anything else. Most importantly for me, it's done little t increase the supply of affordable housing in this country.
    There is this idea that removing negative gearing will slow down housing construction. But this isn't true when only about10% of investor loans seem to be for people planning to build or buy brand new homes. Most are buying existing which doesn't put more housing on the ground, deal with supply issues or stimulate the construction industry.
    There's this idea that t will drive rents up. Not true in the 80s when negative gearing was removed for a time, other than I think Perth and Sydney. So it would suggest not just negative gearing was at play there.
    The best driver of prices in the rental market, in my experience is demand. Not investor driven but consumer driven. Demand is higher than supply, rent prices are higher.
    Negative gearing combined with other associated tax breaks go to the top 10% of income earners, not middle income Australians just trying to protect theirs and their children's futures. And I'm not averse to the rich paying more tax.

    IMO incentives for construction, particularly in the affordable housing space, and negative gearing being conditional on new properties is a better idea.

    We have such a shortage of affordable housing in Aus and little to no policy direction on the issue. I was at a lecture recently where a respected housing lecturer suggested that we will need an additional 1,000,000 dwellings by 2050 and even if only 10% of those were needed in the affordable housing space, that's still an additional 100,000 properties the community sector will need to construct, largely without government assistance or funding.
    So for me, any incentive that encourages growth of housing stock, and increase in affordable housing is beneficial and I'd like to see the major parties investigate that a little more.

    I'm about to become a landlord for the first time. So this will impact on my family. So whilst on one hand negative gearing makes our lives easier, it doesn't do much for the lives of people I work with every day.

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    Quote Originally Posted by GucciDahling View Post
    .
    Negative gearing combined with other associated tax breaks go to the top 10% of income earners, not middle income Australians just trying to protect theirs and their children's futures. And I'm not averse to the rich paying more tax.
    Yes the rich benefit, but there are investors who aren't rich. I'm one. But I guess it depends on ones definition of rich really. I'd rather see banks and mining companies pay more tax than individuals.

    Quote Originally Posted by GucciDahling View Post
    IMO incentives for construction, particularly in the affordable housing space, and negative gearing being conditional on new properties is a better idea.

    We have such a shortage of affordable housing in Aus and little to no policy direction on the issue. I was at a lecture recently where a respected housing lecturer suggested that we will need an additional 1,000,000 dwellings by 2050 and even if only 10% of those were needed in the affordable housing space, that's still an additional 100,000 properties the community sector will need to construct, largely without government assistance or funding.
    So for me, any incentive that encourages growth of housing stock, and increase in affordable housing is beneficial and I'd like to see the major parties investigate that a little more.
    There's no reason why the government can't do both (keep negative gearing, the current CTG discount and incentivise affordable housing). I know that various local councils in SA have areas where they relax the development rules in order for people to build affordable housing and I agree there needs to be much more of this. I'm unsure how much of this happens in other states.


 

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