Steve (et al),
For someone who has never had any form of savings policy at all and who lets their money simply flitter away without putting money aside and budgeting, I believe that negative gearing is not such a bad thing. At least it’s doing SOMETHING towards planning for long-term financial security. I would say there are plenty of people who wouldn’t mind putting $100 a week away that they can’t touch because they know they will just spend it on crap anyway. That $100 could be paying off a property that will give great return in the long term for little lifestyle change assuming good earnings.
In other words it’s an enforced saving – the money leaves your account on a regular basis and you can’t touch it. You might argue that you could use the money better (and you probably could) but my point is that at least that person is doing SOMETHING towards investing money and not spending it on cigarettes, pokies, alcohol or whatever else is money down the drain.
I think in all the comments I have read from you on the subject, you are assuming that everyone has got a prudent savings policy but I think that lots of people (like me up to now !)don’t and negative gearing is not a bad strategy for those people.
I would appreciate your comments on this.
Peterhen,
You’re right. Any savings is better than none at all, however, negative gearing is SLOW and stops your borrowing power. If people can not get the negative gearing syndrome out of their heads then try the Margaret Lomas philosophy. A new residence with high tax deductions
Spider
Hi Peterhen,
(post moved to the property forum)
You make a good and valid point. Yet, for the professional investor, if s/he had to be forced into saving then there would be little chance of long-term success.
I have met plently of people who have had major money problems… and almost all have had a spending problem rather than an earning problem. This is why the first major chapter of the book is devoted to money habits/management.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
peterhen,
I agree with you- something is better than nothing. Don’t forget- you don’t only get returns from rent- use the depreciation allowances for properties built post 1985-1987 etc. Rent only needsd to be a part of your return- use the tax system to make up the shortfall of negative gearing :o)
kay henry
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