Macdee
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I say, I say,
Is losing your job the sdame as retiring, cos I’m almost there and need to know?
Cheers

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Well it depends (however for most people the simple answer is YES).
It all depends on your “predicted” taxable income. You may have other investements that you may sell every year and therefore (hopefully) have good cap gain. However these gains would have to be huge, because 50% is discounted anyway.

Let’s keep it simple. Negative gearing is probably not for you if you are about to retire. (Again if you have a lot of equity and … OK foget it;)

Eigentum
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Yes you are correct but you must consider two other things:

1) Time value of money. Money in my pocket TODAY is better than in 5 years time (so to speak).

2) I would like to use the thinking of the positive gearers against them this time!

“It is better to pay a bit more tax on the gains, rather than have no gains at all!” [] (sorry couldn’t resist …)

So the advantage using this technic is:
– You save money each financial year
And as a bonus
– You even get somemore when you sell! How good is that.

For “some” people that is all they need, and they will be very happy with this method.

OK if you want to do a full “profit-loss” analysis , you may say “Hey, why don’t you get some positively geared properties. You get to extra cash every week AND you will make a gain when you sell.”

I would say. Agreed, BUT it takes a lot of *TIMMEEE* to find this properties, and remember these people don’t have much of that (otherwise they wouldn’t be earing so much. They have a job they MUST stay focused on.).

Also for positive geared properties, they *ONLY* (and yes this IS relative) put about a $1,000 in your pocket a year. So to make it worth while you need about say 20 of them . (again we come to the time factor, not only finding them but taking care of them.) And if you earn $100,000 or more does $20,000 really make a difference when it is taxed at 48.5%?

Please don’t get me wrong. If you have the time I am sure positive gearing can be fun! I am just trying to say that it is NOT the BEST solution for EVERYONE. And YES negative gearing (or should I say positive cashflow) DOES have some advantges for *some* people.

Finally if you do a full profit and loss analysis you will see that negatively geared (positive cashflow) properties well chosen will beat +ve geared properties anytime, hands down!(I have done this as an exercise and would encourage everyone to do the same.)

I guess the main theme in all my posts is that you MUST know what you are doing and WHY you are doing it. (and have a good chat at the same time

Pin

I suspect it has more to do with the school holidays than anything else!

(I think we have quite a number of parents here.)

Cheers,

Pin

Here is a quick example on why negative gearing is soemtimes VERY good, depending on the persons situation.

This technic can only be used on newer type properties where depreciation is applicable.

The person that would be interested in this would earn more than $75,000 p.a. and doesn’t want to have more than 4 or 5 IPs. (However keep to the 3 most important ruls of PI Location – Location – Location. and maybe another one “Floor plan”.)

OK so let’s do some sums.

Scenario ONE

Earnings $75,000
Taxable income $75,000
Tax $22,600
LEFT AFTER TAX $52,400

Scenario TWO
– One negatively geared property
Rent = $13,000
Interest + Expenses = $16,000
Depreciation = $7,000

So this property cost’s you $3,000 p.a (i.e. Negatively geared!)

Earnings + rent = $88,000
Taxable income = $88,000 – $16,000 – $7,000
= $65,000
Tax = $17,900
LEFT AFTER TAX = $54,100

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THEREFORE having a Negatively Geared property will ACTUALLY save you $1,700 p.a. in tax!!

This is actually one of my favorites because these properties are normally “high growth” properties. This technique even though it is negatively geared is also known as “positive cashflow” because AFTER tax the property saves you money.

So please, STOP insinuating that negative geared props are ALWAYS bad. For some people they work great!

(Yes, and I will say it again. You will not be able to purchase more than 5 properties using this method as it will then become really negatively geared. However for “some” people this will work fine.)

Pin

Hi Crahsy,

Was just wondering whether they were *famous*. That’s all. So you would say that these are just ordinary people then?

Pin

Hi Mini,

Thanks for giving it a go. I will reply to some points and make some other statements. I may have to make a second post later…

First I would say that I read the Today Tonight Q&A between Steve and TT. (http://todaytonight.com.au/factfiles/646144.html) and this reassured me, and helped understand where Steve is coming from. It is actually a VERY good read!

I would like to stress a few things however, when it comes to property investing. (Especially with positive cashflow properties.)

Steve said:

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If you really want to do it and you are prepared to pay the price in terms of time and money I’m sure you will be a success.

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Agreed!

I would like to stress the time factor. You NEED lots of it! Please remember that this *IS* Steve’s full time Job AND he has a business partner (Dave).

If you really want to get into IP you will have to get rid of your day job sooner or later.

IP requires a lot of work and research. (probably more that a normal day job.)

And yes, you will need access to some money somewhere, somehow.

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I concentrate on larger regional areas, but the truth of the matter is that because good people live everywhere, opportunities abound.

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This needs to be stressed! Very reassuring…

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Personally, because I know that good people live everywhere, I’m interested more in the person than whether or not the town where they live has a KFC. Having said that, I don’t invest in rural property as it’s not my niche.

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PLEASE REREAD THIS!!
This is one of the things that has been worrying me. People have been flocking to rural areas to find +ve geared properties, which they will most probably regret. (OK If you have bought anywhere in the last 2 years you will be fine, But I am thinking of people who come to this forum NOW and think “OK I have to buy something, somewhere, NOW!!” and go to woop woop to buy something . Only do so if you a ABSOLUTELY sure about what you are doing!!

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I think everyone who invests in property needs to expect that sooner or later they will come across a tenant from hell.

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This is not mentioned enough. Interestingly there is a thread right now that does mention this a bit: https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=4344

IN CONCLUSION

Most people don’t have the time to do proper research, and fully understand what they are getting into. So I am worried that they will go out and buy something just because property investing is the trendy thing. They most likely (after coming here) will look for a +ve geared property.

They will look far and wide and finally find something in some remote part of Australia, and because they have finally found *it* they will buy without doing due diligence. (this may not happen but this is what I am worried about!)

Also the thing with +ve geared properties they ONLY put something like $1,000. PER ANNUM in your pocket. (i.e. peanuts.) WHY?? because this is eaten up so fast by EXTRA expenses that you forgot to put into the equation.

For Steve this is a completely different story. He has the money and the backing. I am thinking about your average Mum and Dad here, who don’t know what they are getting into to.

Property is deffinitely the way to go BUT you will not become millionaires over night and you MUST do your due dilligence. It CAN be very rewarding however, BUT also VERY demanding!

OK enough for now. I feel that I have left a lot out, but I might write another post tomorrow.

Pin

OK here is an answer!

Let me summarise.
– You have 2 kids
– You earn 30,00K p.a.
– You are reteried

Let’s see:
– Looks like a good pention to me! (or is it a wage??)

– Do you have equity in your own home? (What is your house worth and is there any mortgage on it. If yes, how much?)

Pin

Hi Wilandel,

Well said!

However when you say

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make a real effort to only post about things that will REALLY benefit someone

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Can warning people and telling them to be cautious, be benefitial? I think so, but what do you think?

If you are about to buy a newish property and I tell you to check for termites and you tell me: “Oh don’t be so negative, this is a newish home “. and then find out later that the house is full of them. Would my warning have been benefitial to you? It sure would have! (and yes termites can find there way into a house within a year or two!)

What I am trying to say is “Accept the warings and the coutions” when they come and instead of labeling peope as “NEGATIVE”. Lets discuss it in a courteous manner.

Pin

xyzzy,

You have heaps of experience. So please put this to rest. Is it possible to make over 40% p.a. CONSISTENLTY and PREDICTABLY?

OK you have been doing this for 25 years so it must be working for you, but is 40% realistic or is it more like 5% to 15% and some years 40%???

Cheers,

Pin

Thanks for your replies Crashy.

So are the TLS shares only worth it because of the buyback or is it a good investment in and of itself?

Pin