Lyrical I like Margaret Lomas too. Have you looked on her website? I noticed that she has a lot of these aged pensioners units for sale, but they are really hard to finance- I have tried to buy a unit like that because it sounded good. I guess most people must be paying those straight out of their LOC or have them secured against another property, cause lenders don’t like them. I was just wondering whether her other deals would be hard to finance as well.
Kay, I had a good laugh when I read your advice (step 1 and step 2) on finding +cf properties. Great sense of humour. Also when you’re at an open day with your partner, in a loud voice tell each other everything that’s wrong with it: Gee look at the rusty windows, Oh they’ve just painted over the mould on the ceiling etc. LOL Might bring the price down a little.
Hi Alexander & Melbear,
I will try to explain Offset gearing and how it works, very simple, best part is you cant tap into huge amounts of equity and capitalise very quickly.
here is how it works.
Please note, i have not taken any cash on cash or any added expense into this, just the loan figures that is all.
here is how it works.
You purchase 1 Passive Geared Property, (why passive geared. Passive geared is were the property pays it self off and also puts money in your pocket at the same time.)
details as followed.
Property $50,000 Rents at $150 a week
Weekly Repayments are $50,000 over 30 years at 6%.
Which equals = $74.94 a week
Passive income (Weekly Repayment minus rental): $74.94 – $150 = $75.06 in passive income
Your commitment to this property assuming that is always being rented is no commitment but passive income in your pocket. This Surplus cash added to your income, will be taxed as you are making profit.
Instead of getting taxed on this profit offset it against a negative property, which will neutral out your profit.
Example and explantion below:
Property $200,000 Rents at $250 a week
Weekly Repayments are $200,000 over 30 years at 6%.
Which equals = $299.96 a week
Negative income (Weekly Repayment minus rental): $299.96 – $250 = -$49.96 in negative income (know as negative gearing)
Using your passive income against this negative geared property, you are able to offset it.
eg. Negative geared (out of pocket) -$49.96
Passive income $75.06
Equals $25.10This has created a win – win situation of where 2 of your properties, 1 being +ve and the other being -ve are paying each other off and no out of pocket expense.
If you are to take in all your expenses, simply purchase more +ve cash flow properties to create a balance in covering all expenses and the cost of gearing a -ve geared property.
Hope this helps and explains offset gearing.
Cheers
Still in School
P.s – i am still in university at the moment, though i am changing my degree and going to tafe instead to study Accounting(Banking and Financing) next year. Before you guys do ask, i do work, though i work a 32 hour week every week and on top of my uni classes.
G’day Duckdavis…
You will find plenty of appropriate Properties in about 12-18 months time,,
Bill
Bill O’Mara
Real Estate,Mortgages,Share Market Strategies.
[email protected]Thanks, Lyrical. As I thought, I was getting caught in definitions as used on this forum. I understand the maths well and I guess that means my IPs are “neg geared but pos cash flow”. As the nett result is pos cash flow I consider the tax arragement to achieve it (incl. neg gearing) part of the means to an end (ie I have pos cash flow IPs, not pos cash flow AND neg geared IPs).
Anyway, it’s all words in the end.
Speaking of which, it was actually Margaret Lomas’ books that got me in this game. Of course, it’s getting harder and harder to find places that meet the criteria she describes. Still, that’s part of the game.
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