澳洲Australia property positive vs negative geared | Sydney


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Looking at properties around Melbourne, it seems impossible to really pick up anything half decent for under $450,000.
Lets just say a property that costs you $450k earns you $380 a week in rent.
You borrowed 400k because you had 50k deposit. Now with interest only your paying roughly $620 a week but earning only 380 in rent. So your chipping in an extra 240 that makes it negatively geared.

So where are all these properties that people talk about buying that are positively geared? For that to happen I would have to find a house that is half the price of my 450k house but earning the same amount of rent, that seems impossible! :confused: bit confused here.  

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pauly said: ↑
You borrowed 400k because you had 50k deposit. Now with interest only your paying roughly $620 a week .Click to expand...
Why are you paying 8% on a resi loan?  

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pauly said: ↑
where are all these properties that people talk about buying that a(re) positively geared?Click to expand...
.....you must be new.....  

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There are none (Melb). The property market at the moment is ‘not right’ if you do the figures, however that doesn’t mean you shouldn’t buy, just means you need to have your priorities sorted. What are you buying a property for? Do you want quick CG and ‘flip it’ for profit? Do you want CF+ return? If the answer is yes then I think you’re out of luck in the current market. If you want somewhere to live, prepared for the long haul and can get finance then go for it. Time in the market...  

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alexlee said: ↑
Why are you paying 8% on a resi loan?Click to expand...
If he is or is not, that is not either the issue, not or his question. Just pretend he is paying 6.86% interest... And return is still negative.......

I don't think you helped answer his question did you Alex ?

I believe pauly, that people invest in negative geared property in the hope that it will soon cost them nothing to hold and eventually it will become positive and it will grow in value also whilst the loan should not go up ...

So some hold and accumulate more proertyies, some flip and sell them off

hoep that helps a little  

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Hi Pauly,

If you're kicking in some of your own $'s to pay for the difference b/n the mortgage & the rent, depending on your wage, you will probably get some of these $'s back from your tax return. (Or you can lodge a variance form with the taxman & get this estimated return in your pay each week instead of as a lump sum at the end of the year.) A depreciation schedule can also add to the value of your tax return.

If you add this tax return to the rent the property makes, it may bump it up by 'x' amount so the actual holding cost of the property may only be 'y' amount per week.

You're correct in stating there don't seem to be many cashflow positive or neutral properties on the market at present.

There are ways to manufacture a better rental on your property eg minor improvements, dishwasher, aircon to bump up the rent (depending on whether there's a call for that in your area), or turning a large house into student accom eg 6 rooms @ $100wk = $600(just a figure plucked outta the blue) better than $380 wk rent...although many other things to consider with student accom ;)

Where in Melb are you looking?

Regards,
M&M  

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pauly said: ↑
So where are all these properties that people talk about buying that a positively geared?Click to expand...
Not sure if you've read Nathan's threads? Nathan buys positively geared properties regularly. This thread is an interesting read.

http://www.somersoft.com/forums/showthread.php?t=61566

Regards Jason.  

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Sorry for the grammar mistake, always in a rush when I type these things on the net.

Yes I am new to the market (23 years old), but I do understand the basics of negative gearing and tax back and what not. I have created a spreadsheet. Its attached for you guys to have a look and tell me what you think, very basic though.
http://www.somersoft.com/forums/attachment.php?attachmentid=6572&stc=1&d=1285052587

We are looking for the long term, to buy and hold for as long as we can I guess.

jaycee you said
"I believe pauly, that people invest in negative geared property in the hope that it will soon cost them nothing to hold and eventually it will become positive and it will grow in value also whilst the loan should not go up ... "

But if the point of buying a negative geared property is waiting for it to turn into a positive geared property, why not start with positive geared, that way you are not putting any of your own money into it, and your profits can come in the way of appreciation of the house and possible any money that is left over from the rent.  

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pauly said: ↑
But if the point of buying a negative geared property is waiting for it to turn into a positive geared property, why not start with positive geared, that way you are not putting any of your own money into it, and your profits can come in the way of appreciation of the house and possible any money that is left over from the rent.Click to expand...
Finding positively geared (do you understand the difference between positively geared and positive cashflow?) property is not easy, at least not at the moment. It may be in areas that you are not willing to buy in, or involve work you are not willing to undertake.

For a lot of people, the question is not 'do I buy a negatively geared or positively geared property', but 'do I buy a negatively geared property or not buy at all because I can't seem to find +vely geared properties?' So the question becomes 'am I willing to put some money into a property that I believe will go up, or do I keep looking for positively geared, and take the chance that I don't find anything and miss out on the gains?'

One could also argue that those areas that have high yields (country properties, for example) may have more volatile growth.

Re the spreadsheet, what's the point of all that info if your repayment amount is hard coded?  

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Negative gearing is actually really good because it helps reduce your tax bill  

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Deltaberry said: ↑
Negative gearing is actually really good because it helps reduce your tax billClick to expand...
Yes, and positive gearing means you pay extra tax, so cant be good - right ;)  

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pauly said: ↑
But if the point of buying a negative geared property is waiting for it to turn into a positive geared property, why not start with positive geared, that way you are not putting any of your own money into it, and your profits can come in the way of appreciation of the house and possible any money that is left over from the rent.Click to expand...
Hi Pauly,

I think people go for negatively geared for a variety of reasons eg high income, paying loads of tax & need to offset this against a 'loss' in their portfolio and/or they buy a -'ly geared one with the assumption that the growth the property will achieve will eventually outweigh the initial 'losses' like in blue chip areas.

Starting with a positively geared property, you are probably looking at regional or country areas which traditionally may not have achieved the same growth as a property in closer proximity to a cbd. (mining town etc may debunk this theory)

Depends what you want to achieve with your portfolio: capital growth over the longer term or a property than can support itself in the present but may never get you the gains that (eg) certian blue chip areas get. (Both is obciously the ideal).

A property that achieves good capital growth will theoretically allow you to borrow against it faster than one where the rent pays for the loan & generally has lower CG. Again, theoretically, this should allow you to grow your portfolio faster :)

These are just my thoughts, so don't take it as gospel ;)

Regards,
M&M  

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neil100 said: ↑
Yes, and positive gearing means you pay extra tax, so cant be good - right ;)Click to expand...
Who said that Neil ???

Deltaberry was tryign to expalin to the guy how negative gearing is viewed, since he doesn't have a full graspo of theis resi proerty investing thingy...

Of course positive geared increaes oyur tax, but why woudl that be bad 0- if I got offered a payrise for doing the same job as I do now, I would take it, even though I would pay more tax... if a tenant offered me double the rent and that mad e the proeprty psotive, of course I'd take it,m I woudlnt;' say , nah, I dont want your money ! I am sure that Deltaberry would do the same  

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pauly said: ↑
Looking at properties around Melbourne, it seems impossible to really pick up anything half decent for under $450,000.
Lets just say a property that costs you $450k earns you $380 a week in rent.
You borrowed 400k because you had 50k deposit. Now with interest only your paying roughly $620 a week but earning only 380 in rent. So your chipping in an extra 240 that makes it negatively geared.

So where are all these properties that people talk about buying that are positively geared? For that to happen I would have to find a house that is half the price of my 450k house but earning the same amount of rent, that seems impossible! :confused: bit confused here.Click to expand...
I hear this statement all the time - or a slight variation of it.

The first mistake you made was assuming that a "decent" property has to cost $450k or more. It doesn't.

This is a mindset that is all too common.

Here's one example of a decent property - ours - and we did no special anything to buy it. We actually went out for a look around, had a budget of not much and bought one that day.

No real DD other than to say we know the area a decent amount - Frankston.

It is a 2 x 1 bed villa unit with a courtyard, S.L.U.G in a complex of 10, built in 1991 (depreciation). Central position near all the amenities.

Bought for $152k in 2004. Now worth $220k and rents for $220 per week. If you were buying it today you would say "nothing special" and I'd agree, but our rent return based on our purchase price is reasonable, we've had reasonable cap growth and have done nothing to it other than normal wear and tear, and few vacancies.

It's a no brainer and it's decent.

Now, even being as so-so as it is - based on todays' figures of $220k and $220 p/week rent - if you had 2 of them you would have yer $440k property with about $440 per week rent.

That's a fair bit better than your scenario and I probably made a [email protected] investment decision to buy it.

So, the blinkers need to come off.

You won't get pos geared anywhere in Melb currently, but with a bit of clever purchasing, you can get pos cashflow after tax - the overall cashflow return after all rent, tax deductions and depreciation are factored in are more than the outgoings to hold it.  

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Jaycee - I think you'll find Delta was taking the p*ss, as was Neil.

Pauly - people gear into assets which produce an income loss in the hope they will produce a capital gain. That's really the only plausible explanation.  

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pauly said: ↑
Looking at properties around Melbourne,

So where are all these properties that people talk about buying that are positively geared? For that to happen I would have to find a house that is half the price of my 450k house but earning the same amount of rent, that seems impossible! :confused: bit confused here.Click to expand...
Melbourne prices have been rising for a little while, so finding something cf+ in Melbourne might not be an easy task. In fact, it is not all that common to find something cf+ in the capitals in the best of times. That does not mean they don't exist, just hard to find, or you need to do something creative to them to manufacture that kind of yield.

Here is an example of properties with a good yield on the outskirts of Sydney. I'm not saying this is the best area and I am not saying that this is the only place in the country with good yields, but it is an area close to me, and I don't have to do any searching to show some examples.

http://www.realestate.com.au/buy/pr...ist-1?activeSort=price-asc&source=refinements

Houses in this area will rent for between $285-$300pw. They are nothing special and are affordable for the tenants and give a good return to the investor. I have several of them and I do nothing much to them except keep them in a rentable condition. They might attract those on benefits (they have to live somewhere), but they usually have a stable income stream. A word of caution though, if investing in affordable housing, you need to make sure you have a decent PM, good insurance and a little something in your back pocket, just in case, if you know what I mean?

Some will try to tell you that you have to choose between CG & yield, but I have found that is not always the case. If you buy somewhere where there is strong demand you will usually get both. :D  

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Skater,

People seem to spend a lot of time arguing & defenindng that this exists or deoes not exist and show all sorts of exmpales.

But I wonder sometimes if that is what the person asking the quesion wasreally trying to find out..

Do you think it is necessary to look at thees cas  

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jaycee said: ↑
Skater,

People seem to spend a lot of time arguing & defenindng that this exists or deoes not exist and show all sorts of exmpales.Click to expand...
Yep! Usually because they are newbies and don't realise they are out there, or they are lazy and want someone else to do the looking. I don't mind helping the newbies, but I won't help the lazy.

But I wonder sometimes if that is what the person asking the quesion wasreally trying to find out..

Do you think it is necessary to look at thees casClick to expand...
Sorry, I don't understand what you are trying to say here.  

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skater said: ↑
Yep! Usually because they are newbies and don't realise they are out there, or they are lazy and want someone else to do the looking. I don't mind helping the newbies, but I won't help the lazy.



Sorry, I don't understand what you are trying to say here.Click to expand...
Depsite positive cashflow houses existing, are they necessary to accumulate to be succesful at this investing ?

I also don't think newbies are lazy either, they just don't understand how / what / when / why / where yet - if they were actually lazy, wouldn't they NOT become new investors or wannabe investors, and just whine about how they can't invest cause it's too hard except for them & only possible for lucky people, a trait I don't see..

I think t  

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jaycee said: ↑
Depsite positive cashflow houses existing, are they necessary to accumulate to be succesful at this investing ?Click to expand...
It depends on many things. Personally, I prefer something that adds to my income, rather than take from it, however, if you only have a low income, you might not be able to afford something that costs you $$ each week. Horses & courses & all that.

I also don't think newbies are lazy either, they just don't understand how / what / when / why / where yet - if they were actually lazy, wouldn't they NOT become new investors or wannabe investors, and just whine about how they can't invest cause it's too hard except for them & only possible for lucky people, a trait I don't see..Click to expand...
I think you missunderstand me here. I am not saying that newbies are lazy. Heck, we were all newbies at one point. I am more than happy to help a newbie out, but I won't go out of my way for somebody that asks for someone to do it all for them. Two completely different things but they can sometimes (certainly not always) be intertwined.  

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