All Topics / General Property / Positive Gearers vs Negative Gearers

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  • Profile photo of Still in SchoolStill in School
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    @still-in-school
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    Hi Guys,

    we all probably know now, that the rural and regional country market has picked up and changed now, and many investors and first time investors, have gone out and have purchased or cleaned up the +ve cashflow properties…

    … i know there are still some +ve cashflow properties around, but are people still trying to source or find these deals, or have people moved on and are just gone back to purchasing neutral or -ve geared properties?

    for me personally, i like to invest in both, and do offset gearing.

    so i guess the real question here is…

    who here is a -ve gearer or +ve gearer or does both?

    Cheers,
    sis

    People 4get that by saving just $3 a day & investing it sensibly
    over a working life, you’ll end up with around $1 million

    Profile photo of RugbyfanRugbyfan
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    @rugbyfan
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    I am looking at keeping up the diversification in our portfolio. I have four properties that I am looking at with negotiations going well on one.

    two are +ve CF and in regional NSW, one is a block of land next to one of the +ve CF properties (buy and hold with ideas to use both blocks for a development) and the last one is a brand new house which I am looking at both CG and a good yield.

    So I guess I am copying SiS’s offest gearing strategies. Seems like a less risk situation for us.

    ‘Eat rich food, barbeque a yuppie’ [greedy]

    Profile photo of yackyack
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    @yack
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    My aim is to buy quality investment properties.

    So I start as ve-, then as time progresses they become ve+ and I can then buy more quality properties. My strategy does require one to have some income. Jan Somers is the author of this strategy and I have modified it for my purposes and its worth reading her books.

    My criteria is
    1. Walking distance to beach, parks and schools
    2. Walking distance to Train and shops. A bus is not public transport in my mind.
    3. In my area – middle ring bayside surburbs of Melbourne. From Mentone to Frankston.
    4. Reasonable quality so its easy to find tenants
    5. I dont buy brand new
    6. Median priced properties. Not expensive ones and not cheap ones. I will pay a little extra for the above requirements.

    Profile photo of kay henrykay henry
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    @kay-henry
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    Thing is, Master sis, that if our expensive properties had potential for both CG and rental yield that was CF+, well, we’d all be in there doing the CF thing. If only our $300k property got $600 a week rent, well, wouldn’t we love that?

    But *someone* has to buy nice houses and apartments. To suggest a beautiful unit with views, or a lovely landscaped house is a bad investment just messes with my psychology, because at the end of the day, being an investor is a psychology, and we do what makes us feel comfortable. Otherwise, we’d just feel off our heads all the time- completely worried about what we were doing. Who wants to have a nervous breakdown about RE? We just do whatever feels right for us- and that’s such an individual thing.

    Sis, I will buy properties that suit my headspace. I’d have no probs with buying CF+ properties if I felt they were good buys. But do prefer post-1985 apartments- I am not a renovator, and wanna set and forget.

    So I guess I’m something of a neg gearer but i do have a prop that is now 10% yield- lucky me :) and one day, when the money runs out for me, I’ll be a “wannabe gearer”- hehe. So I’m gonna try and buy up a few more IP’s before I’m 40, so I can continue to play this fun game of monopoly.

    Best CF+ is Old Kent Road
    Best Neg Geared is Park Lane

    kay henry

    Profile photo of yackyack
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    @yack
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    When I played monopoly as a kid I always liked the red and yellow ones. eg Trafalgar Sq, Leicester Sq. Not the real expensive ones and not the cheap ones either.

    Thats how I invest today.

    Profile photo of CarLoverCarLover
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    @carlover
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    Post Count: 60

    I aim for my properties are postive cash flow after tax.

    However, at the moment, it is difficult to find such properties in the areas I am looking at.

    CarLover

    Profile photo of JetDollarsJetDollars
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    @jetdollars
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    Dear All,
    I would love to buy -ve gearing property which is very similar to Yack criteria. Problems are my gearing has reach the limit therefore if I continue to buy more -ve gearing property then I won’t be able to support it with my income.

    So what’s the alternative? well, for me is to look for +ve gearing property where I don’t need to support my property with my income.

    Situation is changing everyday. I might need to sale one of my heavily -ve gearing property to pay off some of the neutral gearing properties so that all of them is +ve gearing. By doing this I will have the opportunity to look for quality investment properties (like Yack).

    So, +ve gearing property is the way to go for me at this stage.

    Kind regards

    Chan Dollars
    [Retire Young, Retire Rich] [strum]

    Profile photo of raymondoraymondo
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    Hi Everyone,

    What a wordsmith our Kay is!! Your Monopoly analogy said it all about the two sides of this debate.

    I find myself in the Yack and Kay camp. More by good luck than good management (as well as the passage of time) I’ve found my 2 IP’s – which were poorly researched and backed up by little logic -have become CF+ve [tongue]. Jan Somers approach makes sense to me too, and after the first plunge into the RE pool you realise her approach is reasonably painless, even if you are putting a few dollars in.

    Because I limit my contribution to around $50 a week after tax, I’m not finding many opportunities in the current market. So I plan to look around, but expect to wait a while. The wheel will turn.

    Raymondo

    Profile photo of fjficmfjficm
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    @fjficm
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    hi yall

    i agree with sis , yack, henry .

    im 30 and have 4 IPs

    overall CF+ve 10 K/ yr valued just over 1.1 mil with 500 K owing

    intially slightly negative or neutral then paid off more to make it positive.

    looking for long term 10-15 years goal

    so this is what im comfy with; well located properties within 40-50 K from CBD with potential for growth priced below 200 K on a good piece of slab and minimal outgoings

    People talk too much about props IN GENERAL but i think one has to look at props in different price categories, areas, potential etc. The houses priced <200K will always increase and demands will always be good and if not, it will only be transient because popn is always growing and people need a place to stay and they buy whats affordable. Also recently in API they said that housing affordabilty hasnt changed that much compared to 15 yrs ago due to better salaries and CPI. Investors may be a little more cautious about buying ie. in a non-frenzied state but i believe value of props will at least hold or drop a ittle at worse in my described areas.

    Profile photo of kay henrykay henry
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    fifi- who is henry?? hehe

    fifi- I have a little difference of opinion about your idea of CF+ occurring when one has paid off one’s mortgage a bit. Here’s my ideas about it.

    CF+ can occur at any time during one’s mortgage (by raising rents)- but the calculation is on the price one paid, not on how much one has left to pay on the mortgage. So, for example, on an IP, I had 20k left to pay on my mortgage before I sold it, but I NEVER considered it to be CF+. In fact, the rental yield was low, even relative to the original price I pad for it, some 9 years ago. So I think that’s a false way to calculate cash flow positivity.

    The other way people sometimes call their property CF+, is by saying they paid a higher deposit. Again, I maintain that CF+ is all about rental yield VS original price one paid, and NOT on how much deposit one puts in. I could put $100k of my quity into a 300k property- a 1/3 deposit) but my measurement still has to be on the paid price and the rental yield.

    Just a few thoughts :O))

    kay henry

    Profile photo of KarenBKarenB
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    @karenb
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    Hello All,
    I have ended up with 1 x -CF, 1 x +CF and 2 x BECF.

    I believe that we will always have a mix of + and – although I would aim to do more +++ as you can obviously get more that way. I would like to do some wraps and so this would increase your + properties.

    Cheers Karen B!

    Profile photo of RubbachookRubbachook
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    @rubbachook
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    Kay, what happened to Mayfair?

    And in any case, I’ll take Mayfair any day.

    * $400 purchase price
    * $200 rent with one house depending on vacancy. With 40 squares on the board, assume this will be occupied 2.5% of the time, so the rent is $5 per circuit of the board.
    * As one gets paid a fixed amount from the central bank once a circuit, this is clearly a government payment, like Centrelink. As most payments are fortnightly, we’ll assume that the actual rent is $2.50 per week, or roughly $125 per year (allowing for letting time etc).

    Therefore, this is a yield of over 30%! PLUS, think of the capital gain of a property just across from Hyde Park and Buckingham Palace!

    I’m off to the UK!

    Profile photo of RubbachookRubbachook
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    @rubbachook
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    I think I’m onto a goldmine here.

    Even at the bottom end, Old Kent Road.

    * $60 purchase price
    * $0.25 per circuit = $0.125 per week
    * $6.25 per year

    Yield = 10% per year.

    Hmmm…

    Profile photo of kay henrykay henry
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    So chook, the most expensive one on monopoly is Mayfair? Sorry about that! I forgot the addresses and had to look them up in google this morning. Followed link to link until I came across a book called “From Old Kent Road to Park Lane”, about some guy who travelled all over England and visited all the places on the Monopoly Board :o))

    Please forgive my “Latham”. [laughing]

    kay henry

    Profile photo of RubbachookRubbachook
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    @rubbachook
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    The money’s in the railways. But something smells fishy in the London property market. Could it be that these prices are not indicative of the 2004 market?

    YIELD PROPERTY
    31% Kings Cross Station
    31% Electric Company
    31% Marylebone Station
    31% Fenchurch St Station
    31% Water Works
    31% Liverpool Street Station
    31% Park Lane
    31% Mayfair
    29% Bond Street
    27% Regent Street
    27% Oxford Street
    27% Piccadilly
    26% Leicester Square
    26% Coventry Street
    26% Trafalgar Square
    26% The Strand
    26% Fleet Street
    25% Vine Street
    24% Bow Street
    24% Marlborough Street
    23% Northumberland Avenue
    22% Pall Mall
    22% Whitehall
    21% Whitechapel Road
    21% Pentonville Road
    19% The Angel Islington
    19% Euston Road
    10% Old Kent Road

    Profile photo of kay henrykay henry
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    That’s yield, Rubba?? No, no, my friend- that would be CG in the last 12 months… here’s why.

    As we know, exxy props have more CG and less yield, and cheaper ones have greater yield and less CG. So your figures for yield need to be inverted.

    Really, the utilities and railways never should have been privatised. We should have just been taxed every time we landed on them, with the money returning to the box. Like a tax for playing, you know.

    kay henry

    Profile photo of yackyack
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    @yack
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    Rubbachook – looks like you got more time on your hands than me!!!!

    [thumbsupanim][specool]

    Profile photo of RubbachookRubbachook
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    @rubbachook
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    No – that’s yield!

    Using the same logic as in an earlier post that is what the yields work out at!

    But, yes, going on the feedback of some UK colleagues I am starting to think that Monopoly prices are not a fair reflection of the UK market…[stun]

    Profile photo of kay henrykay henry
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    Rubba- sorry, my comments related to the market in 2004 in Australia :o)) Hence, the inversion thing.

    But good to see you really got into the Monopoly notion- it’s an interesting comparison. And particularly interesting given that in the most exxy property, you used to get higher (%) rents- not so now!

    But then, Monopoly was ONLY about getting yields- not to resell the props for CG. Someone needs to rewrite that game!!

    Hey, you know what would be interesting? If the game was changed so that one could sell the properties… and then you got a bunch of people playing – neg gearers and pozz gearers, and all the pozz gearers would get high yields, and the neg gearers would sell their properties… and then see who wins at the end of the day!!

    kay henry

    Profile photo of yackyack
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    @yack
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    Sounds like a good idea. You could have different pieces – instead of a car, ship, cannon etc you could have a Steve McKnight, Jan Somers, Henry Kaye, Neil Jenman pieces.

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