Hi everyone,
Here’s a question that I have often pondered: and maybe some of you out in forum land can help clarify some of the confusion for me.
Often people here, and in the “real” world have expressed the opinion, that negative gearing is limited (of which I do not disagree with BTW) HOWEVER surely the same has to be said for postiive gearing; after all, sooner or later, without adequate growth (and I said “adequate” not NIL…..for those ready to pounce!!!!) the line in the sand will inevitably have to be drawn.
Am I correct in assuming this??????[blink]
Jo
I believe that the biggger wrap operators are busy locating financial partners to take properties into their name.
Pisces
Pisces,
i’m sure the ‘bigger wrap operators are busy’ – a logical conclusion on wrapping from your reply to this post is to place poorly appreciating properties with your ‘financial partners’ at an inflated rate of interest, and possibly calculated on an inflated end value.
mmmm….’financial partners?’
cheers
brahms
If you don’t ask, the answer is no!!
The trade off in – geared properties is faster CG with some IP’s over the last couple of years turning from – to + for me [biggrin]
I like Still in Schools idea of Offset Gearing, achieving a balanced portfolio..
In Relation to + geared IP’s Guess with Banks, they’d prefer you weren’t too ‘rent-reliant’
By The Way.. where is SiS
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorJo
I still believe you need a bit of both in your portfolio.
The positive cashflow properties to give you income, which banks love.
The negative geared properties to give you the capital gains, which can then be converted into deposits for more positive cashflow properties.
Too much positive (usually with limited CG) means your equity builds very slowly and you run out of deposit money.
Too much negative, and your serviceability is stuffed.
By having a bet each way, so to speak, you can improve your serviceability and get capital growth to borrow against for more deposits.
That’s the theory, anyway!!!Keep smiling
Felicity
Hi Redwing,
im still abouts… but just really busy these days… dont reply much, but do try to read everything that is posted….
Hi Mortgage Adviser,
Felicity,That is the best thing I have heard all week!!!
The idea, Felicity mentioned is called “Offset Gearing.”
Cheers,
sisOh no, ANOTHER type of gearing, AAAAAAAAAAARRRRRRRRGGGHHHHHHH!!!!
Keep smiling
FelicityNegative gearing can have NO limits, IF you are able to access the increased equity, and invest in other options that return good cashflow – like Mezzanine/2nd mortgage funding etc. etc. Or perhaps into share trading or some other strategy.
That’s how I’m working it anyway – I had a thought to find CF+ places, but they’re a bit more work, and essentially I am a very lazy person[thumbsdownanim
Cheers
MelI think we buy what we can afford. And you can still continue to buy neg geared places if you are employed and have income (or income from another source). If your income only comes from rents, well, of course you can only afford to buy certain places, and you need the yield for them to be able to pay for themselves. I don’t see neg gearing as completely limited. If you buy places that need virtually no maintenance, and you pump other money into it, then you can continue to buy.
A 500k place might double in 15 years. So might a 25k place. Also, the more expensive place that doubles, allows you to buy more and more property, and allows you more choices. I know what I’d prefer.
kay henry
Iambored :o)
I would be completely happy if the properties that I want to buy yielded 10% Absolutely happy! I am just probably not, at this stage, going to buy rural properties. It’s just something I think is too risky for me. I am in property for the long term, and there are just certain things I am looking at- post-1987 properties, in places that have decent populations, no to low maintenance IP’s etc etc.
kay henry
Mel,
Interesting idea re other avenues of increased cashflow.
Have you pursued the 2nd mortgage/mezzanine funding option to increase cashflow?
How do financiers view this income?
Do they accept 100% of the income for the purposes of serviceability?James
Hi George,
Steve Navra uses a cashbond approach to provide the additional income for increased serviceability.
Recommend a contact with http://www.navra.com.au/ and/or even attendance at one of his workshops (~$190) to get more of an undertsnading of the approach.
In simple terms use equity to purchase a cashbonded ‘annuity (?)’ when then becomes recognisable income by lenders and as such your serviceability increases and you borrow more.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
A very liberal rule of thumb that many folks use is that neg cashflow = growth. This doesn’t always apply but it gives us the idea that some folks aim for cashflow and some for capital growth.
To get both would be the ideal but perhaps a mixture is more achievable!
Cheers folks,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by georgisj:Interesting idea re other avenues of increased cashflow.
Have you pursued the 2nd mortgage/mezzanine funding option to increase cashflow?
How do financiers view this income?
Do they accept 100% of the income for the purposes of serviceability?I was ‘this’ close to securing a 30% income with profit share, but the others in the syndicate couldn’t pull their money together fast enough and we were pipped by someone else….
I haven’t looked at doing Mezz for a few months as I needed all cash to purchase in Sydney, and am putting other cash into livestock which will atually provide better returns too.
As for how financiers see it – i am not sure. I wasn’t looking at the income to show to them, more to fund my neg props/lifestyle.
Another point is that you won’t always get the steady cashflow, rather a payout at the end – just depends on the offer, and what your needs are.
Cheers
Mel
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