I own 2 negative geared properties. I want to sell them & get into positive cashfow properties. Before I do I thought I would explore if it’s at all possible to change them into positive cashfow properties. I bought the Cashflow 2 CD & I didn’t understand the idea that Steve & Dave mention about selling the property & leaving something in the deal & offering the buyer a second mortgage at say 10% – or at least I think this is what they said. I was hoping that someone could explain this concept to me, & if anyone has any other ideas of how to turn a negative geared property into a positve cashflow.
Regards,
Phil SchibeciHi Phil,
Before you rush out and sell, consider why you bought the negative IPs in the first place. Presumably you did research and bought two well located IPs or are you not happy with the way they are performing?
Do you have equity in these IPs in order to fund positive IP purchases, that not only cover themselves but perhaps help you to balance out the negative IPs?
Don’t make any rash decisions because you have found a new concept, do your sums and figure out where you want to go, set some goals….
Just some things to consider…
Cheers,
Sue [biggrin]“Be careful not to step on the flowers when you’re reaching for the stars”
If your neg geared propeties can/are realising good capital growth then I would recommend that you hang on to them (it may cost you money to get out of them). If you don’t have any cash, maybe you could draw out some of the equity in these properties ( if any ) put a line of credit on top of your loans, use this money to buy a positivley geared property then pour all of your available money (including extra money made on the positively geared properties) into the properties that will give you the best capital growth. That way more equity can be realised.
If it is mortgaged, it is also very wise to pay off the home you live in first as the family home holds no tax deductions. What ever you do make sure your finances are set up properly and that you have a redraw, 100% offset or a line of credit ( speak to your finance broker or email me direct to discuss your options further).Hi Phil,
Interest only loan repayments is another option to increase cashflow,Keep future equity in mind, an investment portfolio containing a portion of high capital growth properties will aide in funding your deposits on future pos cashflow investments,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
The method you’re after is called wrapping. You onsell the property to another and collect their mortgage repayments.
eg you buy for 100k at 7% interest and then onsell at 120k at 10% interest. The purchaser has their mortgage with you, not the bank. This scenario would probably give you about $400 per month cashflow.
This is only a quick description, but try in the getting creative part of the forum or drop a line to Qlds007. Hope this helps. G7Ummmm,
The market is supposed to be flat to going backwards… where is all this capital growth going to come from in the immediate future ??There is nothing wrong with selling and taking a profit from time to time..
KP
Originally posted by kp:where is all this capital growth going to come from in the immediate future ??
If it’s a long term investment, does the immediate future really matter?
As long as it has potential for the longer term (although of course this will depend on Phil’s goals).
GP
The easiest way to turn a negatively geared property into a positively geared one is to pay down debt.
Phil, in your case you could sell one property & pay down the other….or use funds you have elsewhere to pay down debt in both.
When considering selling both properties look at the costs for you in doing so…..REA fees, legals, CGT, etc.
What do these total?
Then what would it cost you to buy back in? Stamp duties, legals, inspections, etc.
Add this all up.
Now – how much does it cost you to hold these properties?
So taking that total cost figure, how many months of negative gearing would it take to equal this cost?
This is purely the dollars – what about the time required to sell your current properties & then to locate some good ones that you can afford to positively gear & have similar capital appreciation potential????
On balance, is it really worth selling your properties to buy back in?
Here’s another alternate strategy: use your available equity and cash to purchase a couple of cashflow positive places that will offset the cost of your negative gearing. Don’t worry about whether these places offer much in the way of appreciation (though preferable if they do) – just use them to balance your portfolio.
At the end of the day, IMHO, it’s better to have a balanced portfolio with some high growth properties (which are more likely to be negatively geared) and some cashflow properties (which are likely to have lower appreciation) than a portfolio full of rats & mice cashflow positive properties with little appreciation potential!
Cheers,
Aceyducey
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