turned my o/occ into inv property July 08, at that time int rates were high. About to refi to a much lower rate and have increased rent as of early next year. My prop will become positvely geared. Is this a good thing? I understand that means a little extra cashflow but I wasn't expecting it. This will also effect my tax come July 09? First 6 months neg geared and now positive geared. Which is better, should i be happy? Do I do anything with my tax now instead of end of financial year?
LOL, Id rather make money and pay tax, Then loose money and get a tax discount. lol
People have some funny idea's sometimes.
But seriously, Positive gearing is far better then anything else, Neg Gearing is just a con to make people purchase property they can't afford.
If you had half the year neg geared and the other half positively geared you work on net income or loss for the whole financial year.
So you may end up breaking even.
Really depends on your tax rate. but remember for example on a 30% tax rate you actually lose 70% to get back 30% for negative gearing.
for a $100 lose a week you get $30 dollars backfor a positive gearing you earn 100% and lose 30%
For $100 earned you pay $30 in tax but earn $70.I'd take positive gear over negative gear any day!
Me too! Would rather pay tax on profit I've made than "save" tax on a loss I've incurred.
Neg gearing just helps the cash flow while you are trying to build your asset base. Sure its not as good as positive but positive is not always a option with preferable properties that you expect to see good capital gain. Capital gain is not happening now in most areas but you will see gains again and if the neg gearing helps you with the negative cash shortfall. Well then thats a good thing.
You only pay tax if you are making money. Leave capital gains out of the equation (which you dont get unless you sell anyway) and making money seems to make more sense than losing money – seems a better idea from where I sit.
Cheers
duckster wrote:For example on a 30% tax rate you actually lose 70% to get back 30% for negative gearing.
for a $100 lose a week you get $30 dollars backFor a positive gearing you earn 100% and lose 30%
For $100 earned you pay $30 in tax but earn $70.Thanks Duckster that's the best explanation of positive cash flow verses negative that I have seen. So simple and easy and can see clearly what happens on both sides of the fence!
According to a recent estimate by UBS the total size of the Indian real estate market in terms of total economic value of development activity, is US$ 40-45 billion representing 5 – 6 per cent of GDP. Driven by increasing urbanisation, rising incomes and decreasing household sizes, the residential segment in India has been on an upswing over the past few years. In terms of value, the residential property market constitutes almost 75 per cent of the real estate market in India.
A number of global investors/developers are now keen on real estate investment opportunities in India.
____________________________________________________________________
Belize Condos
Belize Real Estate
Dominican Republic Condos
Dominican Republic Real EstateJaffasoft wrote:duckster wrote:For example on a 30% tax rate you actually lose 70% to get back 30% for negative gearing.
for a $100 lose a week you get $30 dollars backFor a positive gearing you earn 100% and lose 30%
For $100 earned you pay $30 in tax but earn $70.Thanks Duckster that's the best explanation of positive cash flow verses negative that I have seen. So simple and easy and can see clearly what happens on both sides of the fence!
i agree that is an excellent explanation of positive vs negative gearing. ive always thought positively gearing made more sense in investing. but ive been told by many higher income earners that it is better to negatively gear so they can get the so called tax break.
using your example is there a way as a high income earner to have a tax rate of 30%, will this involve the high income individual to have a company business that invests and positive gears properties instead of him/her self?
i know that company's are taxed at the rate of 30% only
It's probably better to consider what you hope to achieve out of your investment. Positively Geared Property is helpful if you're trying to build a sustainable income, whereas Negatively Geared Property is better if you're trying to make gains from capital growth in the long term.
Obviously this will depend a little on your individual position, but for myself I imagine it a bit like this.
To accumulate capital over the long term, negative gearing is a preferable option. But to generate income to help with lifestyle and living expenses, obviously positively geared investments are preferable.
Either way you'll hopefully make a profit.
As above, thank you for clearing this up……
Lets look at how we all make generalisations:
The positive geared people can make $2300 p.a. per property (sometimes less, sometimes more), WOW! what a tough way to earn $2300. Twenty properties later you can have an income of $46K (sorry, less your 31.5%). BUT, they make nil growth.
The negative geared people can pay $8300 p.a per property (sometimes less, sometimes more) WOW! It actually costs you money (sorry, you get a 31.5% tax deduction -assuming this marginal tax rate). BUT you have huge capital growth- do you?
The thing I like about property is there is plenty to go around. People have varied opinions / views on making money that are channelled around there life's experiences and network of friends.
The fantastic thing about people that have opinions far and wide is that it allows many opportunities available so we may all become wealthy, provided the investment strategy is not flawed. There is no one secret recipe. We all have our ways of creating wealth, and they all have an element of truth. But what I can say, is there are some better ways………
I am all for positively geared property. The question is a little silly. What is better, to put $100/week into your pocket, or to take $100/week out of your pocket?
Either positive or negatively geared it is still the same house and will get the same growth. So it is better for it to be putting money into your pocket than taking money out of your pocket.
What is your goal with investing? Do you want to achieve passive income or growth?
If you are after growth then maybe you should get your property revalued and draw on the equity to buy another property? Just an idea.
Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just a Click AwayRyan McLean | On Property
http://onproperty.com.au
Email Me
You must be logged in to reply to this topic. If you don't have an account, you can register here.
