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  1. #11
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    Quote Originally Posted by turquoisecoast View Post
    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.
    I see your point but needing cash in a hurry just wouldn't be a problem. When we sell our house and buy elsewhere, we could always have a little bit owing on the mortgage and use those funds if needed but cash flow will not be a problem. We won't have a mortgage to pay (apart from the investment) and we have no other debt.

    We might even be lucky enough to own outright our house and the investment property.

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  3. #12
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    ours is only negatively geared by $800 a year (so not that much).. But the actual value of the property is going up 14.8 % which out weighs it in my eyes. we are looking at subdividing etc.

    We then want to depreciate from new! We want to buy a family home and have 2 houses for kids

  4. #13
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    Running at a loss saves you tax each year. You then hope that you will make the money back and more on the value of the property when you sell it as the value will increase.

    At the moment it's probably not a good strategy given house prices have inflated but for example the we bout our house in 2008 and it has more than doubled in value so if it was an investment we would have made a profit.

    Make sense?

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    Hetty  (20-04-2017)

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    Quote Originally Posted by nattie84 View Post
    Running at a loss saves you tax each year. You then hope that you will make the money back and more on the value of the property when you sell it as the value will increase.

    At the moment it's probably not a good strategy given house prices have inflated but for example the we bout our house in 2008 and it has more than doubled in value so if it was an investment we would have made a profit.

    Make sense?
    Of course. But I'm not investing in property to make quick money. I'm doing it for my children. It will be long term so will definitely increase in value.

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    Quote Originally Posted by BigRedV View Post
    But if you had the money would you still negatively gear?
    Our accountant says you should always have a mix of positive and negative geared properties, I'd be happy to sit on paid off houses and just pay tax on the rent but DH would always want to use the equity to keep buying!

    If you get an off set mortgage account or keep a line of credit open you can gain access to instant cash if you need it

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    Quote Originally Posted by Elijahs Mum View Post
    Our accountant says you should always have a mix of positive and negative geared properties, I'd be happy to sit on paid off houses and just pay tax on the rent but DH would always want to use the equity to keep buying!

    If you get an off set mortgage account or keep a line of credit open you can gain access to instant cash if you need it
    Do you ever buy the houses people bring to you to sell?

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    Default So why do *you* negatively gear property?

    Yes and we are currently living in one! It was one of our rental properties and the landlord rang DH (this is nearly 7 years ago) and said she wants to sell it , he gave her the appraisal and said that we are looking to buy in that street so let us know if she would be interested in selling to us (she would save the agent fees and marketing ) she said yes immediately so we bought it on the spot , the unit we have rented was a similar scenario , the benefit to us is obviously buying off market and not having to compete, the owners save the fees and drama

    legally as agents we have to fill out a section 47 certificate (duty of disclosure or obtaining benefit ) that has to be attached to the contract if we, our staff or relatives ever buy one of our houses as yes, some agents used to take advantage and there are mega fines if it happens today without disclosure, same when we sell a property we own , it legally has to be written into the contract that the agent has a beneficial interest in the property

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    Quote Originally Posted by BigRedV View Post
    But if you had the money would you still negatively gear?
    the answer to this is yes.

    At one point we were looking at buying a property and had the money to buy it outright. When we looked at the overall strategy, tax and investment options, and out cash flow available to service debt, it was best to buy 2 properties and have debt than to buy 1 outright.

    As a long term investment property can be a fabulous oportunity. Especially if you have the cash to pay it off.

    If you buy a property for $600,000 and get a 4% rental return - you borrow 70% at an interest rate of 4.5% - and the property is effectively costing you 0.5% per year. Yes, you will need to pay off the principal from your cash flow ... but the property only has to go up a small amount to make a profit. Over time the rental income goes up, the interest that you are paying goes down ... and suddenly the property is completely paying for itself and all capital gain is extra. and the Gain is not on the investment amount of 30% but on the whole property.

    If you put that same $1000 per week repayment in the bank instead of paying off the loan, and not only are the interest rates very low, but you are only getting the interest on the amount of the savings (so $1000 per month). With property you are making the gain on $600,000

    I am not explaining this very well - but essentially that is leveraging, and why people use debt to buy property rather than savings. Its not so much about the tax deduction as it is about using the banks money to make money rather than your own.

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    Quote Originally Posted by BigRedV View Post
    Genuine question.

    When this topic comes up people always respond by saying well it is running at a loss. So why do it?
    Negative gearing is a tax minimisation strategy. That's the short answer. It is best suited to people who are on high tax brackets and therefore get the biggest tax benefit.

    When you buy property for the purpose of investment, you need to look at it as a long term investment, not something you're going to buy and sell in a short space of time (unless you're buying to renovate & make a profit on the resale but in that scenario, it's actually a business, not investment).

    Since property investment generally requires a significant time period, those on high tax brackets welcome the short term losses (which come with large tax benefits) in return for capital growth in the long run (which is also discounted at 50%).

    Lots of factors come into play.. can you afford to take a loss, will the tax saving be enough of a payoff, is there likely going to be a capital gain, will you need to draw out your equity in a hurry, have you got other assets to diversify your portfolio etc...

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    Quote Originally Posted by BigRedV View Post
    I see your point but needing cash in a hurry just wouldn't be a problem. When we sell our house and buy elsewhere, we could always have a little bit owing on the mortgage and use those funds if needed but cash flow will not be a problem. We won't have a mortgage to pay (apart from the investment) and we have no other debt.

    We might even be lucky enough to own outright our house and the investment property.
    sorry meant to quote not thank. my post was intended more as a general commentary/getting on my soapbox than advice directly applied to your individual set of circumstances. but in your particular case, it sounds as though you guys are in a very good position so little of what i've originally stated would apply.


 

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