All Topics / Help Needed! / Determining +ve and -ve gearing

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  • Profile photo of tlgsydneytlgsydney
    Participant
    @tlgerdes
    Join Date: 2015
    Post Count: 7

    Hi,

    Just want consensus on determining +ve gearing versus -ve gearing, in general?

    If you are paying a PI loan is your capital repayment counted as a “cost” when determining gearing as opposed to essentialliy forced saving. Now I know that I cant claim the capital repayment component, just trying to get it straight in my head about is an investment +ve or -neg when paying down a PI loan

    Eg
    If I have an IO loan I pay 1000p/m in repayments + 400p/m in outgoings and receive 1500p/m in income I have +ve of 100p/m
    If I have PI it bumps it up to $1500p/m in repayments + 400p/m in outgoings, receive 1500p/m in income I have -ve of 400p/m

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    The principal reduction would be considered as enforced savings.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of tlgsydneytlgsydney
    Participant
    @tlgerdes
    Join Date: 2015
    Post Count: 7
    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Definitely forced savings. Same goes for paying down your principal place of residence or an investment property.

    Efficiency wise however, paying down non deductible debt first is far more effective than investment.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Maree with Corey but in Tigs situation he has no non deductible debt and has a good rental cash flow from his other properties.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

Viewing 5 posts - 1 through 5 (of 5 total)

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