Hi All,
I am looking to invest into some property in the $250-400k range approx. Have good equity in my own home to use and am in the top tax bracket. Hence its likely some investments will start out negatively geared. What sort of properties are going to be best suited, am i looking for new builds with better depreciation initially? What else should i consider. I have done my research and have picked some area’s but need to refine a little. Thanks.
Hi Ben,
What sort of properties are going to be best suited, am I looking for new builds with better depreciation initially?
One of the subjects I am wanting to highlight in my “Big Picture for New Readers” thread is one that discusses this whole subject. Maybe THIS thread could become the one I want?
I do know that some well-regarded people on here have talked to this subject in the past, perhaps as individual replies to other threads. Hopefully they will add links, or reiterate their positions for you in this thread.
As I recall, the concensus tended to be that a second-hand property with large land was mostly better – unless you were actually developing the new property yourself (giving yourself the savings that a developer would usually take as profit).
Of course, this means that the gearing would be less as you have saved so much cost…. but who seriously wants to pay $50,000 more so they can get $20,000 of that extra cost back again as a Tax deduction?
Benny
Negative gearing in it’s current form helps soften the blow of losses somewhat – but you’re still making a loss. No point trying to make a loss just to try get some tax back, you’re still worse off.
The exception is if its non realisable ongoing losses – ie depreciation, but Benny has highlighted the most important point: don’t chase deductions for the sake of deductions – instead find a strong investment strategy which helps grow your assets and wealth, tax effective deductions is just the icing on the cake. Overall depreciation via new builds can be a useful tool, but you will want to balance this against the supply/demand equation which drives property growth. No point buying a new apartment in an area getting 100’s of new apartments each year, or a house and land package in an estate with 100s of new houses being developed – you will just end up paying a premium and have future supply coming online to slow any potential equity growth.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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