Derek,
Many thanks for your comrehensive reply. I will keep the Manly property and use the leveraged equity to purchase cashflow-positive properties. That way I will have a mixture of growth and cashflow assets.
Regarding depreciation, there may have been some confusion. The Manly property is more than 40 years old, so I have only been depreciating some fixtures and fittings. I have not yet read the tax article you refer to, but I understand there is essentially no building depreciation after 40 years.
Thanks again,
Michael
Originally posted by Michael King:Monopoly: you seem very scathing about cashflow-positive property investment. I agree with you that capital growth has worked as a strategy up until now. I have done very well out of it myself. The question is how best to use your cash and your equity, and whether your unrealised equity should be converted into cash (by selling the property), thus locking in your capital gain and also reducing your interest payments if you were to buy a property of the same value the next day. The main benefit, however, is that your serviceability improves and you can then borrow even more funds. Have you read Steve’s article on this subject?
FYI Michael, ALL my properties are cashflow positive, hence why would I shoot (belittle) the goose that lays my golden eggs???
I understand your logic and where you are going with it all. It is mostly because I am your typical “buy and hold, and hold, and hold” type of investor, only selling when performance of same is bad, and/or financial circumstances change, forcing the sale of IPs.
And finally with all due respect, I do not share Steve McKnights philosophies, although I respect his achievements. If anyone, I would have to agree with Peter Spann’s theories which resemble my own strategies.
As for my comments, I was being sarcastic not scathing, but hey that is your perception of my post and is perfectly understandable. Basically, I think you should do what is right for you, and to that end wish you every success.[biggrin]
Cheers,
Jo
Monopoly,
I take it then that what you are against is selling an appreciating asset in favour of buying cashflow-positive properties ie you subscribe to the “never, never sell” philosophy?
Regards,
Michael
Hi Michael,
“The main benefit, however, is that your serviceability improves and you can then borrow even more funds.”
This sounds like Steve’s “Multiplication by Division” strategy. Must say, I tend to like this idea – on the surface at least. And if being able to buy more (better value) properties by selling one, it has to have merit. But if you don’t have PLANS for the gain, then I’d have to agree with those that say “Why sell an appreciating asset?” Horses for courses.
The other positive with CGT is that it doesn’t fall due until after the end of the current fiscal year (i.e. you won’t be due to pay it for almost 12 months). The key here being “what other investments are you going to make in those months?” THEIR gain could pay off the CGT due on this one and accelerate your gains.
Worth a thought?
Benny
Benny,
You’re quite right, it was Steve’s “Multiplication by Division” article in the May 2004 edition of Insider (on this website) which sparked my interest and my first post in this series. On reflection, I should probably have mentioned this to all so they could read the article first.
I agree with you there is no point going liquid if you have no plans for the money – unless you think the market is going to drop, of course.
Kind regards,
Michael
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