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  1. #1
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    Default So why do *you* negatively gear property?

    Genuine question.

    When this topic comes up people always respond by saying well it is running at a loss. So why do it?

    We are selling this year and moving and with house prices still so crazy in Sydney we will get a good price. If our house was on the market right now we would walk away with at least $800k and that's being conservative. It would be closer to $950k or even more. And if nothing happens between now and then and prices continue to go up then it could be more.

    So that would mean we could buy a property outright where we are moving to and purchase an investment property. Or we could buy an investment property outright and still pay off the house we occupy.

  2. #2
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    Default So why do *you* negatively gear property?

    The rental I have used to be the home I live in and it needs renovating to get a good price for it and when i traded up houses I was too busy to renovate so rented it out. Fast forward 5 years and I still haven't got around to renovating and selling it with interest rates so low at the moment is marginally negatively geared. Makes a $2k loss per year. I wouldn't buy a rental now, I think the market is going to crash in the next 1-2 years. Some people have made lots over the last 10 years in the real estate game but I think those days are numbered and it's not within my risk tolerance.

    Edit: if you have the $ to own one of the houses outright best to make it the one you live in. You'd need to pay tax on rental income from a positively geared property which wouldn't be wise if you owe money on the house you live in. (Interest on the investment loan is tax deductible, interest on the loan of the house you live in is not).
    Last edited by babyno1onboard; 19-04-2017 at 22:08.

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  4. #3
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    Quote Originally Posted by babyno1onboard View Post
    The rental I have used to be the home I live in and it needs renovating to get a good price for it and when i traded up houses I was too busy to renovate so rented it out. Fast forward 5 years and I still haven't got around to renovating and selling it with interest rates so low at the moment is marginally negatively geared. Makes a $2k loss per year. I wouldn't buy a rental now, I think the market is going to crash in the next 1-2 years. Some people have made lots over the last 10 years in the real estate game but I think those days are numbered and it's not within my risk tolerance.
    I won't be purchasing an investment in Sydney but it will be a long term investment for our family. Sure it may crash everywhere but will eventually recover.

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    Default So why do *you* negatively gear property?

    To help pay for it!
    Obviously it's best to have positive geared investments but to start with you negatively gear it to build up your property portfolio for capital gain when you sell it - yes there is a tax deduction but it still obviously costs you more than what you can claim , our plan is to continually buy property, some positive and some negatively geared to self fund our retirement, I would guess it's the same for most of my 200 landlords, 90% of whom only have 1 investment property and are mostly "mum and dad" working investors
    In your case I would definitely buy an investment property for the same reasons but just make sure you have "emergency " funds available for when the home is vacant or big repairs come up, people assume you make all this money in tax breaks when really you are definitely still out of pocket each year (but knowing prices always eventually go up)

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    everyone has their own investment strategies but i personally dislike property. it's over inflated and a lot of hype over not that much...the property bubble is evidence of this.

    property is unattractive as the barriers to entry are high, the potential downside can be financially catastrophic and the ownership costs are not small. it all adds up to a lot of coin and you need to ensure you have sufficient cash flow to keep this thing afloat over the long term. i also don't like the lead time required to get into/out of property. so if you needed access to the cash in a hurry, forget it, as you're likely going to have a 60 day settlement period, and that's after you've managed to flog it.

    positively geared properties are ok but unpopular i guess as everyone seems to think it's better to get the tax deduction.

    property has its place but i think it's such an overrated investment.

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    Quote Originally Posted by Elijahs Mum View Post
    To help pay for it!
    Obviously it's best to have positive geared investments but to start with you negatively gear it to build up your property portfolio for capital gain when you sell it - yes there is a tax deduction but it still obviously costs you more than what you can claim , our plan is to continually buy property, some positive and some negatively geared to self fund our retirement, I would guess it's the same for most of my 200 landlords, 90% of whom only have 1 investment property and are mostly "mum and dad" working investors
    In your case I would definitely buy an investment property for the same reasons but just make sure you have "emergency " funds available for when the home is vacant or big repairs come up, people assume you make all this money in tax breaks when really you are definitely still out of pocket each year (but knowing prices always eventually go up)
    how does running at a loss help pay for something?

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    I built a house and moved in. Didn't like living there and moved somewhere else. I think the area has potential growth so I've held onto it and rented it out.

    It's always been negatively geared as the rent didn't cover the repayments. This year it does. It's not a strategy it's just what happened.

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    Quote Originally Posted by turquoisecoast View Post
    how does running at a loss help pay for something?
    Sorry I mean I was answering why do you negatively gear - we have no choice but to negatively gear it as we can't afford to positively gear it in the beginning , if that makes any sense!

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    Quote Originally Posted by Elijahs Mum View Post
    Sorry I mean I was answering why do you negatively gear - we have no choice but to negatively gear it as we can't afford to positively gear it in the beginning , if that makes any sense!
    sorry yes, i understand and that makes perfect sense!!

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    Quote Originally Posted by Elijahs Mum View Post
    Sorry I mean I was answering why do you negatively gear - we have no choice but to negatively gear it as we can't afford to positively gear it in the beginning , if that makes any sense!
    But if you had the money would you still negatively gear?


 

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