When interest rates go up, there are a lot of negative impacts on the economy. Business costs go up, export sales are affected, tourism is affected.. Eventually, wages go down, and the economy slows down. That is why RBA increases rates, to contract the economy and reduce inflation. When that happens, people have a harder time paying for their homes, especially if they are self employed or expecting a pay rise that doesn't come. Landlords on the other hand have the flexibility to increase rents or find new tenants willing to pay the higher rent. As long as they can ride out a short-term loss until their tenancy agreement expires. It's a grim view of the rental market but it's the truth.
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11-05-2016 07:28 #101
Housing / negative gearing / politicians
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11-05-2016 07:54 #102
Rent in Perth has gone down 13% over the past 18 months, rental vacancies rates are high and house prices have dropped by about 5%. Interest rates of this time haven't changed much. Not pretty for investors that have recently entered the market.
11-05-2016 08:00 #103
11-05-2016 08:10 #104
11-05-2016 08:13 #105
Yes they may get a tax deduction but they still have to come up with the repayments and expenses every week , long term it's a brilliant investment but for most of us it's still really hard work and sacrifice to make sure we are set up for retirement , in our area there are only 7% investment properties, that's not a lot , yes more people want to invest but it's just not that easy
11-05-2016 08:21 #106
11-05-2016 09:06 #107
11-05-2016 10:09 #108
Housing / negative gearing / politicians
Oh and pay the tax office AGAIN when you make a capital gain.
@BigRedV, your first option you mention, is hardly worth it because the stamp duty you have to pay on the new property will be more than the tax you get back when you negatively gear said property. So financially that doesn't make sense.
Or the other option is to keep the property, use the equity to buy another investment property which you will negatively gear. I wouldn't buy a ready to go property, I'd buy something off the plan or that needs work as that's the best way to make money.
For me it's all about the capital gains. NG is just a sweetener really.
My investment property I bought for $180k, I paid $12k stamp duty. I held it for 4 years, in each of those 4 years the most I got back was $1,200 one year, other years it was less than $1,000.
When I sold it I made $80k profit, paid $12k in capital gains.
So without factoring in my 'loss' I paid $24k to the government (state and federal) and I received a max of $4,200 back in tax (that also doesn't factor in any tax overpayments I made across 2 financial years, so the NG portion was less than $4,200). But let's be conservative and say the $4,200 was just NG (which it wasn't) I have paid out $19,800 to the government.
I'm soooo greedy aren't I!?
So yes if investors do this for multiple properties they're in effect paying out more to the government than they ever make in NG and CGD. Especially those investors who hold onto their properties and positively gear them.
Last edited by A-Squared; 11-05-2016 at 10:24.
11-05-2016 12:02 #109
11-05-2016 13:08 #110
Thank you everyone for letting me scab free advice 😄. I just ignore my rental property till tax time and then my accountant takes care of it.
I am going to try to hold onto it for as long as I can. I'm not game to buy another as I'm scared of interest rates going up and not being able to make the repayments. Maybe in 5 years when I'm more secure financially.
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