In the past, it has all been about negative gearing as a tax advantage…but lately ive been hearing that positive gearing is the new and better way to go? And although some start out with a negative gearing perspective, positive gearing should be the long term aim? But dosent the positive gearing method mean that the tax advantages are out the window? Bascially, to ultimately create wealth, we should be aim for positive gearing. Can anyone shed some light on this matter? Views/beliefs?
I like to make sure i make money instantly on the deal, if you do it may be worth negative gearing for a short term, because then you get more return in the short term as long as you can easily afford it. Then after a year or two at the most it should be neutrally, then positively geared so its set up for the long haul. Although if you can get the right property at the right price with enough groeth and it is positively geared then it is a win win situation also.
In monopoly kent st is the best positively geared property and kings avenue is the best negatively geared property. It’s all about affordability and return. (i think i stole that one from someone here).
I have good opportunities in the first situation i wrote, just e mail me if intereted.
Kevin
[email protected]It is such a personal thing that either strategy is quite valid.
Don’t invest for tax losses! However it is a commonly held belief that capital growth properties are usually negatively geared. My experience is that in the main this is true however I have seen examples of the opposite. So I am saying here that we generally sacrifice pos cashflow for growth potential and vice versa.
Some people invest for the future and aim at capital growth, reasoning that rents will also rise to the point where in 30yrs the properties are paid off and funding their retirement.
Others want that retirement early and will chase the pos cashflow stuff.
Some even go for a combination reasoning that the portfolio will be self funding and cover both bases.
It all depends on your goals. I know I am currently chasing capital growth because of my financial situation and goals but that is right for me as other’s plans are right for them.
BTW I am familiar with Old Kent Rd but King St in Monopoly?
Have a super weekend!
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 MortgageHunter:I am familiar with Old Kent Rd but King St in Monopoly?
I wondered the same thing. Unless talking about a different version, I think he meant Mayfair.
GP
Originally posted by Miss Curiosity:But dosent the positive gearing method mean that the tax advantages are out the window?
If you want the tax advantages then you should look for Positive Cashflow Property which provide tax advantages as well as income.
The property that you should look for are those that make a loss on paper before tax and positive cashflow after tax due to high building depreciation write-off.
Kind regards
Jet Dollars
[Retire Young, Retire Rich] [strum]Hi Miss Curiousity,
There is no right or wrong answer for everyone – ultimately what you are talking about is a philosophical difference and as such there are conflicting points of view.
In the end you are investing in property to make money – whether that be via a rental sream, via growth or a combination thereof can only be determined by yourself. As such the preferred investment strategy is largely dependent upon your exit strategy/ies.
Investing to first and foremost reduce tax clearly means you are investing for the wrong reasons – any reduction in tax could be a bi-product (and not the main product) of your investments – bear in mind your accountant is employed to reduce your taxation bill and as such that is why a positively geared investor often creates a dilemma for many an accountant – the focus is different.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Rob,
Your points are well made however the figures are ‘out’ a fair bit.
Bear in mind under the new tax scales coming into effect in July 1 of 2004 the highest marginal tax rate of 47% only kicks in when gross taxable salary exceeds $70000/annum. Up until then the tax rate is closer to an average of 26.5% – i.e $18612.
As such on $100k tax = $32712 with similar reductions up and down the line.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Krazy is talking about the Australian version of Monopoly which came out 1985. Prior to that Australians had the London version of the game. I think there are over 50 different countries for Monopoly now. Great game.
Hi Rob,
Yes rounded up 47 = 50 but that rate will only apply over $70K – and affects a smaller proportion of the total income – and up until that time the tax rate of 26% is a fair way from 50c/$.
Using the gross salary figures provided most of the income is taxed at the much lower rate and as such tax payable is considerably less.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
I don’t know about anyone else, but can you eat a house?[blink] Can it feed you?
It’s funny reading books like Steve’s which is really based on CF+ to let you retire early because the houses allow you to eat from the CF+ but a lot of the word on these forums are saying it’s too hard and use CF- to create wealth.
Too hard I guess [confused2] and OK if you don’t mind working for the rest of your life. Been there done that and life is too short to pray for that day some day in the future where you can retire.
I’d rather do that now. [cigar] I thought that was Steve’s book was all about did it and it works.
I guess people need to see the light one day and realise what they need to do. It’s just frustrating seeing what others say, thinking that losing money is making money, but it is their opinion and that is fair enough.
Later………
I like – gearing for potential Capital Gains, i also like + gearing for ca$h flow..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorIn the long run to build wealth you need to purchase growth properties. Most of these tend to be negative geared properties in the first instance.
As time marches on they become neutral then positive.
The problem with too many negative geared properties is that you need an other income to support them.
So its probably best to have some of both.
Originally posted by aussiemike:Krazy is talking about the Australian version of Monopoly which came out 1985. Prior to that Australians had the London version of the game. I think there are over 50 different countries for Monopoly now. Great game.
Thanks for clearing that up Aussiemike; I have all three versions (Oz, UK, USA) and I still get my streets mixed up!!! Okay, go on, say it, “typical female”!!!! [blush2][laugh4][laugh4][laugh4]
Cheers,
Jo
Well if you insist…TYPICAL FEMALE !!!
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