Hello All,
I’m just starting to learn about prop. investment and one of the confusing parts is that there really are so many ways to make money out of real estate (lease options, wraps etc).
But my question comes back to what Steve suggests which is having a property which is cashflow positive from the start.
From terminologies that I have read there seems to a definite distinction between negatively geared and negative cashflow, and therefore a distinction between positived geared and positive cashflow.
There is also the possibly of a negatively geared property providing a positive cashflow, if non-cash deductions like depreciation can be made to exceed cash losses such as the different between rental income and interest (assuming you are on the highest marginal tax rate).
So, just to be pedantic and understand where Steve is coming from, does he really mean having a cashflow positive property or a positively geared property? It seems to me he means positively geared property because he doesn’t want to include the “Taxman” into his calculations, because in order to include the Taxman implies that you have to continue to have an income to offset against?
Thanks
Kevin.
Hi Kevin, I know exactly what you mean. I too am new to investing in investment properties and are feeling probably as confused as you right now, maybe moreso [
]My only advice right now, and its probably not helpful at all is … persist with all the reading and hopefull you get a few useful responses, I’m looking forward to reading them if you do.
[
] MiestarHi Kevin
You’re doing well so far, it sounds like you’ve pretty much grasped all these weird terms quite well! I have to point out, though, that not everybody uses them quite the same way.
But on the whole, I agree that most of the time when people talk about + or – gearing, they are talking about the situation without tax issues, whereas + or – cashflow tends to be the total end result including everything.
I know I started out with a property that was negatively geared but positive cashflow, I used to get so confused with all the terms!Keep smiling
FelicityHi Kevmiester,
Just out of curiousity, are you the Kevin from Daytrader fame ?chucky:
no, not that Kevin.
Hi,
As outlined at the recent Masters events there are four outcomes that can be achieved from property investing…
1. Positive cashflow: As the name suggests… after tax +ve cashflow
2. Cashflow Positive, Income -ve: negative income as property expenses > property income. But after depreciation and building writeoff allowances are offset against salary income, the overall outcome is +ve.
3. Negative Cashflow: negative income and -ve cashflow after tax (own property from as little as $9.65 per week!)
4. Capital Gains: Simple enough… after tax +ve nett capital gains. Can occur in addition to 1 to 3 above.I guess to be comprehensive I should also add:
5. Capital Loss: Property depreciates in value or where the overall negative cashflow is not greater than the capital appreciaton.
I recognise that it is confusing… but has that helped?
All concepts are fully expained during the Masters event!
Bye
Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
]
] Miestar
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