Is the use of negative gearing in a boom market a good way of raising capital for future ventures?
For instance, it is a lot easier in the current market to get properties which will raise in value 30-40k easily in 12 months. Even if this was to cost you some money week to week (as little as possible) would you not be in a better position after selling in 12 months?
This would give you more capital to work with, perhaps turing some 50/50 deals into CF+ because of a larger deposit. Any thoughts, or am I way off the mark here?James
“Is the use of negative gearing in a boom market a good way of raising capital for future ventures?”
– in order to raise venture capital, for real estate or otherwise, you must demonstrate 1. a well researched and risk adverse method of investment 2. a realistic ROR [rate of return] 3. an achieveable exit strategy. This could transpire through negative or positive gearing.
“it is a lot easier in the current market to get properties which will raise in value 30-40k easily in 12 months”
– if finding [residential] properties that “easily” appreciate by $30-40K in 12 months was a simple task, it is likely most of the population would be independently wealthy.
— Michael
milkman,
It’s great that you’re expanding your mind to think of new ways of raising capital, but if it was so easy to make 30-40k per year (per property?) using negative gearing, why would we worry about positive cash flow property in the first place??
Good luck! [
]
Steve.ps: If you’re confident enough to be able to make 30-40k per property in 12 months, then go for it! Just be prepared for the possibility that all might not go as planned.
pps: Are you sure we’re still in a “boom market”?
“Knowledge is Power”
Thanks guys,
I should have been a bit more detailed. I suppose I meant boom area, as opposed to market. The area I am looking into is still showing great growth, with prices still rising steadily. I believe that it will rise 15-20% this year. It will however be -ve geared.
I was just so keen to buy +ve cashflow properties!!James
Once again, it’s great that you’ve identified a growth area, but you need to consider the saleability of the property at the end of the 12 months. You can only sell a property at 15-20% higher than you bought it for if there is someone willing to pay that much for it when you want to sell.
It’s a simple idea, but with all the statistics and predictions going around the last few months, it’s easy to forget!
If you think it’s a goer, compare it to what you might be able to get with your money elsewhere and then compare the risk levels.
Good luck!
Steve.“Knowledge is Power”
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