I have been investing for two years now, and have built up a portfolio of 6 residential houses that are running at a $1,500 monthly profit, the problem I now have is the area i’m investing has just experienced a boom which has seen properties double in price over the last 18 months, I have a chance to buy another house in the area, which is in very good condition, but with prices rising, this property will be running at a $250 monthly negative cashflow, is this a good idea, with my portfolio being able to carry this loss, and therefore reducing my taxable income?
I look forward to your advice.Hi,
Very hard to say David as you only you know your investing plan.
If you are after +ve cashflow then buying the property would seem to push you further away from your goal. On the other hand, provided the market keeps appreciating then maybe it would be a good capital gains asset.
One thing I would say though is that investing to save tax is like eating icecream to diet. It’s a poor strategy that sees more people fail than it does succeed.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hello All,
My question is the opposite, ” Need info, to sell or not to sell?
I have an IP which has had very good capital appreciation but the word is that it will appreciate further because the council is redeveloping the CBD of the area. The only problem is that it is very heavily negatively geared – to the tune of an extra $500 coming out of my pocket every month, INTEREST ONLY!
Should i sell and take my profit after i’ve held it for one year (i lived in it when i first bought it) or should i keep it for the long haul for more appreciation.
I know you probably can’t give me actual advice, but your opinions would be very much appreciated.
Cheers.Bassla, have you bought another PPOR since?
If you have owned it for more than a year, you can sell at anytime. You can also claim exemption for that year you lived in it.
If you have not got a PPOR now (or even if you have, you can choose which one is your ppor for the time you have owned the other one) you could sell the place, and pay no CGT.
If you are certain there is growth, and you can afford the $500, keep it. If you are not, then perhaps it is a good time to sell.
Cheers
MelThanks Mel,
But doesn’t that go against the idea of positive cashflow property? I believe that there will be capital gain, but noone can be certain. It is a unit and there are alot being built around the area but it’s in Parramatta (Syd)and there is alot of new commercial development going on so…?Bassla, yes, I guess it does go against the +ve cashflow ideal – but who said that that was the only way to invest?
It is Steve’s way, and this is a forum set up by him, but I’m sure that a lot of people who log on here do not ONLY subscribe to that view.
If you can, you could always try to find some +ve cashflow properties that would help to offset your out of pocket expenses, and eventually get the portfolio to be neutral, or even positive.
Be as sure as you can (from research etc.) that the are you own in will mean increasing values – otherwise you are just throwing money away.
Cheers
MelThanks Mel! You’ve helped heaps again!
CheersHi,
I think that your decision will become clearer once you have set a minimum required return on invesment.
Note, I haven’t used CoCR because, in your case, the return would be negative.
What I’m saying is work out how much capital growth you demand, and while it achieves this the great, but when it doesn’t it might be your trigger to sell.
While you don’t have this benchmark, it’s difficult to see the sell signals until perhaps it is too late.
Finally, definitely work out a plan for paying off the debt. Interest only repayments on a large amount of debt can be quite risky. A few dollars a week will add up, even if you only create an interest offset account and have your salary put into that account… at least the daily interest will be lower for a few days. Having said that, some IO facilities don’t allow interest offset facilities.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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