I have a property that I would like to purchase which gives about $1200pcm and based on the banks variable rate of7%, I have to pay them ~$1750pcm. This is not including other fees like REA fees, council, water fees. My question would be, how much would you put from your own pocket towards your IP ??? is this what people called negative gearing?
Please share your experience if you willing to or PM me? Any opinion is appreciated.This property is certainly negative geared.
You must anticipate that it will appreciate at a faster rate than your $500+ shortfall each month.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi, mentee
Definitely CF-. Your outflow will be more than $500 pm factoring all other fees.
Perhaps you can look at ways to adjust the loan, such as a bigger initial cash deposit or longer loan period. Getting a CF- property is not most people in this forum would recommend. You might save some money in tax, but a loss is still a loss.
To answer your question, the amount of cash outflow into an IP really depends. If you can claim negative gearing via taxation and turn your CF- IP into a CF+ one, then good for you.
However, with such a large cash outflow, it will be difficult.
Check out Steve’s first book or this month’s Money mag, where there is an article on negative gearing.
Hope this helps.
Cheers
Daniel [specs]Thanks guys,
so pretty much ($500) is too negative?
i’m assuming that for your first IP, you have to start with -CF. You will be considered extremely lucky if you can find a property with +CF on day one (except apartment, you got no CG though, correct?)
I’m realy keen in getting a 2-3br house around western area (prefably west /footscray, seddon, yarraville, maybe sunshine).
since this area is close to the CBD, and within my price range around 250k.
Anyone got one around this area, any suggestins???think about what your tax rate is as say its 47.5% you have to lose 52.5% to get 47.5% from your outlay. also how much of your income is in the 47.5% tax margin as it would need to be at least 550 per month other wise the tax refund will be less as it is in a lesser margin rate.
If the property is newish, you may be able to claim significant depreciation benefits. It is not uncommon for a reasonably new negative geared property with good capital gain and depreciation benefits to end up costing $70pw out of the investors pocket. This is $3640 pa but a $300,000 property that increases in value by an average 8% each year would give you $24,000 equity in the first year and this amount would compound for each year after that. (provided you bought in a reasonable area)
Obviously you there is a limit to how many times you can do this because you would eventually run out of money that you can put into support mulitple IP’s. However, over time rent does rise to cover more of the amount that is coming out of your pocket until they eventually become cashflow neutral, positive geared or even cashflow positive.
Todd Burns
http://www.freepropertyhelp.com.auDoes anyone know whre to grab sold prices for west footscray area, for 2-3brs house? and another question is what sort of commitment you getting into when you win an auction?
Thanks for all your replys, guys
cheersI would avoid auctions. They’re focussed on making the seller as much as possible and the buyer has no negotiation power. They’re good to visit and watch to get an idea on what interest the property has though.
Originally posted by Kuade:I would avoid auctions. They’re focussed on making the seller as much as possible and the buyer has no negotiation power. They’re good to visit and watch to get an idea on what interest the property has though.
I think auctions are focussed on getting the REA as much as he can by turning over property sales faster.
Melb has an established auction scene and people readily buy and sell this way. other cities not so much and many buyers are scared off by a process they feel they don’t understand, cannot control and doesn’t let them know what sort of money the property may sell for.
However, if you can find a motivated vendor combined with a slow market an auction could be perfect.
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I have seen any property in this area for private sale. i guessed it is rare to find one these days.
Quoted “However, if you can find a motivated vendor combined with a slow market an auction could be perfect.”
What is the indication for the above?, or you just come and see on the auction day??
I’m sorry if i’m slow, I am still very new in the game.
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