Good Morning All,
I currently have just the 1 investment property which of course is Negatively geared. Before reading Steve McKnight’s book on ” From 0 to 130 Properties in 3.5 Years” I was never aware of the Negatively Geared concept and what its disadvantages are. I would like to go down the road of having just Positive Cash Flow, but with a large mortage of $297k and my rental return of $310 PW and the Canberra market now at a decline, I’m just not too sure what to do.
I think selling would be a bad idea, what can you recommend I do? I wish I had actually bought in QLD instead but I just keep hearing the “Buy & Hold” strategy all the time. And now with the slight rise of interest rates, I just think I don’t have any choice but to just stay where I am. I obviously got into the property investing at the high time of the market 2002.
Anyway, I don’t want to get out of the investing, it took a lot getting in and that is where I want to stay. Hard saving up a Deposit when your first starting!!
Kel Hately
AustraliaHi there,
Most people think that their biggest assets is their home, but more often they are not aware that their homes are actually liabilities as they create negative cash flows.
Things will always work out best for those people who make the best of how things work out, so if you think your property has a great potential to increase in value then you should buy and hold or else you should make some changes. It is hard to tell whether your property will increase in value that is huge enough to cover your needs, but I am sure you’ve learned something.
Seize the day
Hi Kel,
Buy and hold is a strategy that has (and does) work well for people who research and purchase well. There is many an ‘expert’ who uses this approach very successfully and combines with a negative geared strategy – so don’t go slashing your wrists because you read something that questions your investments.
By all means analyse the comments and then fit the + and – into your goals and strategy. Investing is like many other aspects of life – you need to know where you are going or else you’ll never know when you get there.
My advice is that you should take some time out and work out what you have (mindset, assets, income levels and so on) at the same time you need to work out what it is you want to achieve and how property (which seems to be your chosen investment vehicle) will help you get where you want to be.
If cashflow is your ‘devil’ at the moment with respect to your existing property I suggest you ensure that you have take all available preliminary steps to maximise this aspect to property investment. Have you converted loans to I/O? Are you using a 15.15 (if suitable)? IS your rent at market rates? Can you increase rent returns for minimal costs? And so on.
Before undertaking some wishful thinking you may find it advantageous to maximise what you have.
Part of your consideration should include you LVR on this exsiting property. While you indicate the value of the mortgage and rental received there is no mention of the ‘value’ of the property. This is an important part to property investment and can be overlooked in some equations.
You also need to be aware that not all real estate markets are the same. While the ‘press’ of Australia is heavily focussed in Sydney and Melbourne they cannot speak accurately (if at all) about the wider market in other parts of Australia.
Don’t be mistaken in lumping all real estate markets into one entity – each place has it’s own market. The issue for you is getting to know the market you are working in.
Derek
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0409 882 958
Property investment advice and researched property in quality locations available.
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