Hi guys how is everyone.
l haven’t had time to drop in for awhile but something came up the other night l’d like to ask about.
A friend of ours was over and after a few drinks starting hinting about how much money she’s making of her second house .
Even tipsy she was still pretty cagey but dropped plenty of hints but then brushed it of the next day . She did say she only wants the one investment property becasue she can make so much off it.
HOW ?????
She has her own house it’s worth around 550 , she owes 300 on it and the second investment house she payed 350 and borrowed the lot .
l’m not trying to delve into her private stuff but l am wondering how l can make just one investment property pay as well as she says .
She works full time and owes as above on the both but says it’s all about the negative gearing and claims and she makes a packet from just the one .
l know you can make abit like that but from what she was saying ! ls anyone here doing the same or know the exact ins and outs or could maybe put up a few figures on how to make just one place pay as well as she says ?
She wouldn’t spill the beans on exact figures so just what she calls a packet l don’t know but !Thanks for that.
MkcHi mkc,
Could be a number of things – but at the end of the day she could just be talking about the growth in it’s capital value.
If the property is negatively geared it’s not producing income over what its costing.
‘Making a packet’ could just be related to the price she paid for it and what it’s now worth. Even if the loan was the same amount as the original purchase price there’s no way a loan in perth goes up as quick the price of property.
The packet may just be the capital growth and this is not ‘cash’ until it’s sold. Paper profit in other words.
Hope that helps, just a thought, could be wrong.
Either way – it’s always good to hear of people doing well and if nothing else use it as motivation to start saving and get investing – be it property or any of the other dozen asset classes [hair2]
Hey,
Hate to be rude, but it seems like your friend is blowing wind up your a$$. My guess about why she blew you off the next day is because she realised how much she exaggerated. Unless she is on an extremely high income, im talking upwards of 100k a year, there is not much benefit in holding negatively geared property. If your on a high income, yes there is some tax advantages, but its not going to be the type of plan that will put you into retirement. I’ll give some figures, my partner and i are considered to be in the high tax bracket, so we have two negatively geared properties, which we renovated both in the last financial year to claim. I’ll tell you right now the difference between our tax returns from when we did own the property, and when we didnt, was only 3k. While that money helps, its certainly nothing compared to the money that was put out.
I guess it depends on your aim… If you want to buy property to make some tax claims then buy all means buy negatively geared investment property. If you are wanting to become financially free, or to set up a good retirement for yourself, then run as far away from that firend as you can! Buy cashflow positive properties.Personally, i would much prefer to be paying tax as it means ive made a profit, rather than claiming for losses i have made, which means i lost money! Thats what your friend is doing, she is merely claiming for losses she made. Which way do you want to go?[blink]
Maybe when she said “packet”, she meant to say “racket”
There are all sorts of rackets that would make a packet!
Maybe she is smuggling illegal reptiles, or selling counterfeit designer jeans out of her garage.
Live, Learn and GrowLifexperience
My guess is she is embarrased at not realy making money on her investment except for the capital gain and wanted to look like a switched on investment guru. (Who knows, maybe she is) But at the end of the day she probably is making money hand over fist with the CG.
I don’t know anything about Audrey’s situation, but in our situation with heavy negative gearing and one income, because the loans are in the hubby’s name, it makes a big difference to the tax he pays.. Maybe we owe a lot more than Audrey. Our houses are inner ring Brisbane and capital gain has been very good. I realise the new tax brackets make it less attractive to be geared, but it is still money back to us. Mind you, we need the refund to keep us in food and clothing.
It makes a big difference to our tax position.
Wylie.
Audrey..
I’m with PropertyWA, she was probably talking about the increase in equity?
I’m also not sure about the $100k per annum comment,we earn “much” less than that and are now on one wage(for the last two years with a new bub), however, in January this year we worked out we had made about $90k in the previous 6 Months (unrealised gains as its equity) and you may be surprised to know that most people who -Gear are in the 30% tax bracket.
Growth of late has seen us pay out one IP in full, then refinance it to a nuetral position for the next IP..Growth also saw us recently refinance and top up the loans to access the equity in our IP’s(now looking at some Managed Funds, another IP and creating a Safety Buffer.
I like SiS’s idea of Nuetral Gearing Or achieving a Balance of Investment Types.
Most of the people who I work with have more disposable income (play money) than we do..but we’re looking at the big picture and as we progress (andlearn from others) things get slightly easier
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsThere are a number of points missing to give a concrete answer. But i will make a few assumptions . Lets say she has made $100K equity on the $350K investment over 2 years. This equates to around $1K per week. At $50/wk you would need 20 cashflow positive properties to reach the same yield (debatable point). The important thing for your friend is the famous Renae Rivkin quote ‘buy low and sell high’. I would suggest if she has made a large amount of capital on the 2nd property to cash in and secure her position.
The other point she may have been focusing on is the tax benefits only. Not a great reason to invest but it does help. There is a document called the NAT 2036 , tax variation document and it is possible receive your tax benefits as per your pay period ie weekly, fortnightly etc. (dont accept a lazy accountant that states , just claim it at the end of the financial year , CASH IS KING). Take your money and use it to offseyt bad debts. The difference between buying new to 2nd hand is substantial . I recently purchsed a house in Coburg and claimed over $15k in depreication in year 1. That money does not physically come out of my pocket.
Another point also is consider hybrid trust structures if you are investing with a partner and there is a reasinable discrepency in incomes. Your accountant can advise if this suits.
Thanks very much for that input guys .
l was just about to agree with audrey , because this girl does have the old gift of the gab but then , l get to Redwings and then Tony’s .
She did babble about a very good accountant , extra good – and the very nice cheque every three mths !
C G , l dunno . this place is in Melbourne , last l heard Melbourne’s slowed , she’s bought it 12 mths ago and that could mean it hasn’t moved far at all , maybe even gone backwards atleast this was what l was thinking on the night because l know her property and thought she payed too much .
She’s suppose to be on around 100 a yr .Cheers . Mkc
Not sure whats she means Mkc
Maybe as Tony said she has submitted a ITWV Form and recieves extra cash inher hand each pay packet..
We’re just making educated guesses though without knowing all the info..not sure what the 3 monthly chq is a about; is this property residential?
If she wont give any more info i wouldn’t worry about it and move on (or invite her for drinks again)..but thats just me :o)
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsI am thinking that maybe if she does have a great job and earns a lot of money she may be talking anbout the depreciation of the property she is claiming therefore minimising her tax.
Not everyone is a bull artist some people actually do have a grip of the situatuion.
I dont know either parties so i cant comment further.If you can get newish,high capital growth properties that are slightly neg. geared or neutral after tax, they will eventually become CFP because of rent rises and then you have the best of both worlds. This is what I have done and my wage is a fair bit under $100K.
My properties have been through their respective capital growth cycles and they are now benefiting from rent rises because of low vacancy rates. Because my properties are near new there is minimal maintenance and the average equity that builds up each year is significant.
Todd Burns
http://www.freepropertyhelp.com.auThanks for the imput guys.
l guess it comes down to there’s 101 ways to skin a cat and if she was legit we don’t have enough to go on anyway .
Sounds like allot here are doing similar things though and very nicely to so we have nutted it out in a sense after all really .Think we’ve done alright considering .
Cheers .
MkcLots of money was there to be made in the Syd/Melb cycle from 99-03, Brissy followed and then obviously now seeing a maturing/ed Perth & Darwin so $100k from one property is actually quite the norm if ur on the right side of the trade. However going forward is a totally different story. Everything is so exxy right now. Not even sure if the experts are looking in Oz for +ve CF IPs. Even the yields in Texas and Arkansas have been crushed considerable in the last 2 years. These T3 receipts is looking rather attractive at the moment with no risk of a hot water system blowing up.
Your friend may also be a wee bit cagey with the info because she doesn’t completely understand it well enough to explain it properly. I know what that feels like being a learner myself. If she has a good accountant she may only be interested in the end benefit. Some people believe firmly in the old saying ” why keep a dog and bark yourself”.
My money is on increased equity and possibly the depreciation schedule on the rental. But who knows. [aacool]
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