Hi Everyone,
I have just read Steve’s guide and agree it’s a great starting point for a new player (like me!). I am a little confused though due to the fact there are no comments around negative gearing, in fact the book focuses on positive cashflow.
I was under the impression that the tax advantages of negative gearing would be one of the major factors in making a property decision (someone please tell me if Iam wrong).
I am about to enter into my first investment (which is a new house 300K) that (through research) I have confirmed will provide rental income of approx. 400 pw. I will have a weekly shortfall of approx. 100 pw. and I intend to hold the property (25 years+).
I thought this was not bad going and through the negative gearing would also benefit from some tax breaks, even increase my taxable income (through depreciation of property). Is my head in the clouds?
I would like to research the tax implications further, could some informed members out there point me in the right direction? please [eh]
Welcome bmulrooney
Steve’s focus is postive gearing, rather than using any negative gearing to make things work – hence you’ll see no enthusiasm for negative gearing from him.
Don’t buy a property just to save on tax. A property valued at $300K that rents for $400pw I would buy. Are you sure it will cost $100 per week? Even if you borrow the full $300K, by my really quick calcs the interest at 7% (you can do a lot better) is $404 per week. So your out of pockets would be the rates, vacancy, property manager, land tax etc. etc. I wouldn’t think that this would add up to $5000 (but I could be wrong of course)….
If your research has been good, and the house is in a good area, I would buy it. Is it new(ish) ie after 1985? If so, definitely get a depreciation schedule done. This could really cut down your out of pockets.
Cheers
MelHi Melbear,
Thanks for your encouraging reply. Nice not to get grilled on my very first post.
Yes the property will be brand new (currently building) and is in Sanctuary Lakes Resort (golf course development near Melbourne) have you heard of it?
Could you clarify your reference to the figure of $5000, is this amount significant to tax?
I also work for a bank therefore receive a discounted rate (sucks doesnt it), but you are correct, I am not in it for the tax benefits but as there was no information relating to tax benefits I was a little wary.
Thanks again.
G’day, my figure of $5000 was that as the interest = the rent (or in fact in your case it’ll be less than the rent), to come up with your figure of $100 out of pocket per week, that is roughly the $5K i quoted.
As the property is still being built, the rental is obviously a projection! From who? Have you asked a few other agents to get verification? Hopefully it’s on the money, but if not, the figures aren’t quite as good…..
I don’t know Melbourne, so don’t know the development. It’s got a nice name, so I hope it’ll be a good development, building etc. If the rental stacks up, then I think it’ll be a good investment (providing the growth is there too of course..)
Cheers
MelMel,
Sorry not thinking at the moment. Yes I have researched through various agents received the same figures. Thanks again for your feedback, I will know where to go next time
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