Hey I went to a off the plan showroom today in melbourne CBD today to look at apartments. The sale guy in there was really pushy and pitching me the positives in buying off the plan such as stamp duty savings, first home owner grants etc and he was saying how great negative gearing is as an investment. In my head I am thinking this property is overpriced already and if I was to negative gear, I dont think the capital growth on this apartment will increase in value to the cost of holding it , therefore losing money. I said to him this factor and he didnt really know what I was talking about, and than his reply was negative gearing is good for tax purposes and property always goes up. Did I make sense or is he on the right track?
While you didn’t mention any specifics, I would say you’re on the right track and he’s just trying to make a sale.
Hi Ronnie,
Sounds like the sales guy had very little knowledge of the financial side of property investing. The truth is that he doesn’t really get paid to care whether or not it is a good investment for the buyer – he just wants to sell the property.
I think you are definitely on the right track. Negative gearing can be a good strategy with the right property, but in my view it is an option that is best left to a property with a large land content (which will appreciate over time). Houses or townhouses / villas would be a better alternative. The tax benefits for negative gearing alone are not enough – there must be capital growth.
I am not sure if you live in Melbourne and have a good feel for the apartment market. If not, I am always cautious about buying apartments off the plan in large complexes as there is often very little you can do to improve your prospects of finding a good tenant, or selling the property later as there are many others very similar so they are compared typically by price. It is hard to maximise yield in these cases in my experience.
Hi Ronnie,
Did I make sense or is he on the right track?You made sense…. He was just wanting to make a commission. I would think his “not understanding” was selective amnesia on his part !! I’m sure he knew EXACTLY what you meant.
Next time, if it is such a good deal, ask him how many of these great deals that he owns !! :p
Benny
Thanks for the reply guys, To be honest I don’t know much about property investing, just read an article on the train one time about brief explanation on positive gearing and negative gearing. The sales guy was well dressed and fancy so I thought he might of actually been right, because coming from a kitchen background I serious don’t have much knowledge on this stuff.
Haha yes I will ask him next time Benny. I did however ask him if I did buy this could I resell this for more after completion and than his answer was property always goes up and you should keep this longer so you can negative gear for tax purposes and claim depreciation etcc ….
If you really want to ask an awkward question, ask someone selling Off The Plan what happens if the valuation comes in significantly lower than purchase price (happens quite often). I’ll give you a hint, you’re in an unconditional contract and possibly have to make up the difference in cash.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Hi Ronnie,
To be honest I don’t know much about property investing, just read an article on the train one time about brief explanation on positive gearing and negative gearing.
Have a quick look at the link following – it will answer a lot of early questions to get you up-to-speed and warn of dangers.
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/
Enjoy,
Benny
Thanks for the link Benny wow there was so much information that I didnt know. If I was to buy a property with my partner and for example we earned $50,000 each and we were negatively geared $5000. At the end of tax year how would that calculate that ? Would we be treated taxable income together since the property is under both names eg 50k + 50k = 100k salary minus the $5000? Sorry If this sounds confusing as I am confused
Hi Ronnie,
Would we be treated taxable income together since the property is under both names eg 50k + 50k = 100k salary minus the $5000?
I believe you would do separate Tax Returns (thus your Tax benefits will be lower than if one of you earned $100k). That’s simply because those on lower wages pay less Tax, so any refund will be less too.
Talk with an Accountant re how the $5000 is apportioned – I wouldn’t want to hazard a guess on that one. If it were $2500 each, then both of you would be taxed as though earning $47.5k and any Tax you had paid above the required amount would be returned to each of you from the ATO.
Make sure your losses include Depreciation and all the other “non-cash losses” too. Again, an Accountant will set you right. It’s a whole other dimension. But you sound like you have the basic idea – well done. Now to add to that knowledge eh?
Benny
Both of you and sale man making sense.
His job is to sell you something to make money for himself.
Your job is to buy something to make money for yourself.Off plan is a good way to make money, ONLY if you know in and out of the development process & finance behind the scene.
Most people DO NOT know all the in and out about the development process&finance for the particular project they buy, hence they can’t make money or hardly make some money.Investing purely on saving tax is totally rubbish.
Investing is to make money.
End of the day, if your $100 going out from your pocket, you NEED at least $101 coming back.
All the jargon such as, off-the-plan, tax saving, stamp duty saving, are just too much BS.Look at the numbers !!
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