Forums / Property Investing / General Property / You Can’t be Serious??!!!!

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  • Profile photo of pinit2000pinit2000
    Member
    @pinit2000
    Join Date: 2003
    Post Count: 85

    Macdee
    ******

    quote:


    I say, I say,
    Is losing your job the sdame as retiring, cos I’m almost there and need to know?
    Cheers


    Well it depends (however for most people the simple answer is YES).
    It all depends on your “predicted” taxable income. You may have other investements that you may sell every year and therefore (hopefully) have good cap gain. However these gains would have to be huge, because 50% is discounted anyway.

    Let’s keep it simple. Negative gearing is probably not for you if you are about to retire. (Again if you have a lot of equity and … OK foget it;)

    Eigentum
    *********

    Yes you are correct but you must consider two other things:

    1) Time value of money. Money in my pocket TODAY is better than in 5 years time (so to speak).

    2) I would like to use the thinking of the positive gearers against them this time!

    “It is better to pay a bit more tax on the gains, rather than have no gains at all!” [:D] (sorry couldn’t resist …)

    So the advantage using this technic is:
    – You save money each financial year
    And as a bonus
    – You even get somemore when you sell! How good is that.

    For “some” people that is all they need, and they will be very happy with this method.

    OK if you want to do a full “profit-loss” analysis , you may say “Hey, why don’t you get some positively geared properties. You get to extra cash every week AND you will make a gain when you sell.”

    I would say. Agreed, BUT it takes a lot of *TIMMEEE* to find this properties, and remember these people don’t have much of that (otherwise they wouldn’t be earing so much. They have a job they MUST stay focused on.).

    Also for positive geared properties, they *ONLY* (and yes this IS relative) put about a $1,000 in your pocket a year. So to make it worth while you need about say 20 of them . (again we come to the time factor, not only finding them but taking care of them.) And if you earn $100,000 or more does $20,000 really make a difference when it is taxed at 48.5%?

    Please don’t get me wrong. If you have the time I am sure positive gearing can be fun! I am just trying to say that it is NOT the BEST solution for EVERYONE. And YES negative gearing (or should I say positive cashflow) DOES have some advantges for *some* people.

    Finally if you do a full profit and loss analysis you will see that negatively geared (positive cashflow) properties well chosen will beat +ve geared properties anytime, hands down!(I have done this as an exercise and would encourage everyone to do the same.)

    I guess the main theme in all my posts is that you MUST know what you are doing and WHY you are doing it. (and have a good chat at the same time ;)

    Pin

    Profile photo of ADAD
    Participant
    @ad
    Join Date: 2002
    Post Count: 636

    I am going with xyzzy on this one. Things seem to be travelling well. I am no economist but I truly beleive that there are dark clouds on the horizon and the depths of the dow are yet to be explored. This will have ramifications everywhere. It may be one,five or ten years but I believe it will happen. I always ensure every deal I do makes me money from day one so if anything does occur I do not have to rely on the fickle wind of Capital Growth. There are opportunities in every market all the time it is a matter of taking the best.
    Just my thoughts.

    Enjoy
    AD [:0)]
    (Andrew)

    It is good to have an end to journey toward, but it is the journey that matters in the end.

    Profile photo of MJKMJK
    Member
    @mjk
    Join Date: 2003
    Post Count: 157

    Pin,

    I typed up a long winded reply yesterday and something funny happened to my computor so I lost it.
    The first example you gave is not “negative gearing” but rather “positive gearing”

    Positive gearing = costs exceed income before tax but not after tax.

    So yes you CAN make money from positive gearing but not negative gearing.( excluding capital gain of course which is the main objective of such a strategy )

    We must understand the differences b/w positive gearing and positive cash flow.

    Positive gearing is an excellent tool for any property portfolio because when yo retire you will need tax benifits to shelter your now passive income!

    I am a great beliver in investing for positive gearing and capital gain and have the properties to back that up.

    Great conversation though. Exersises the mind.

    MJK

    Profile photo of pinit2000pinit2000
    Member
    @pinit2000
    Join Date: 2003
    Post Count: 85

    Hi MJK,

    I know what you mean. Loosing everything I wrote happened to me a few months back…

    Seems like we have slightly different definitions, but hey, if we agree in principal there are no probs.

    Yes and I did it a “bit” in purpose to get people thinking. I am always worried when people don’t know what they are doing and simply try something because everybody else is …

    So here are my definitions:

    Positive gearing: The rent covers ALL costs and you have a net positive cashflow BEFORE tax. (Full stop)

    Positive cashflow: The rent does NOT cover all costs, however due to the non-cash deductions (and depending on your tax bracket.) it saves you money AFTER tax.

    Negative Geared: The rent does not cover all costs and does NOT save you money after tax.

    Postive cashflow ONLY works if you have a large income (> $70,000 to be safe, can work for > $50,000), and the property you buy is relatively new. Is this for everyone? NO!

    A property that is positive cashflow for a high income earner will be NEGATIVELY GEARED for a low income earner.

    quote:


    Great conversation though. Exersises the mind.


    Agreed! (let’s keep it up.)

    Pin

    Profile photo of Di_CamDi_Cam
    Member
    @di_cam
    Join Date: 2003
    Post Count: 13

    Hi Pin,

    Agree with your logic on positive cashflow vrs positive geering vrs neg geering but don’t agree with your definition of a “high” income.

    Cheers,
    D

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    Di_cam…

    Obviously you earn ‘more’ than the 70k stated then as ‘high income’ [;)]

    as long as you save more than you spend..you’re gaining ground [:0)]

    “The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”

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