Forums / Property Investing / General Property / How can we Convert a (-) geared property to (+)

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  • Profile photo of w1wardw1ward
    Member
    @w1ward
    Join Date: 2007
    Post Count: 1

    Good evening,

    We purchased a brand new investment property 2 years ago in Hornsby, NSW. All the promises said a rental income of $440pw!!!
    Our actual income today is only $320pw. (that is where the market is at). We have an interest only loan, and the rent we collect per month is just under half of the interest being charged. So yes, we are paying the difference!!!

    Does anyone have some good advice on how can we can lower the amount we are contributing? How could we turn this into a Positive Cashflow?

    Look forward to your kind responses.

    Wayne.

    Profile photo of foundationfoundation
    Member
    @foundation
    Join Date: 2005
    Post Count: 1,153

    You could sell the house, take the $16,000+ per year it is currently costing you in interest payments, rates, insurance, property management fees, maintanance etc, stick it in an online savings account and after three years you would have ‘earnt’ (saved + interest) over $50,000. This would continue to grow, providing positive cashflow each and every year with next to no risk.

    Sure, there are plenty of more adventurous ways to invest, I’m just pointing out that even the option with the lowest risk is giving a far higher return than property, and there is a very real risk that a property anywhere on the eastern seaboard will incur further capital losses over the next few years while giving a very low (negative) return.

    There are limited options for improving rental returns on a new property. After all you can’t simply reno the kitchen and bathroom. I guess you could look to extend it, redesign it into 2 residences, perhaps if it has land there is room you could add a second dwelling?

    F.[cowboy2]

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    Not much you can do I’m afraid, but three things that you can do to lessen the burden if you haven’t already done so;
    1. have a depreciation schedule prepared by a quantity surveyor and give this to your accountant. Costs $400-500 to have done. This will add a lot of ‘on-paper’ deductions to your taxable income, and may nett you back thousands more per year on your tax refund.
    2. Apply to the ATO (your accountant can arrange this) for your tax return to be ‘paid back’ to you each week/pay day. This will also help the cashflow.
    3. look for ways to find extra money in your budget to use towards debt reduction to lessen the interest you need to pay.

    Cheers,
    Marc.
    [email protected]

    “we get sent lemons; it’s up to us to make lemonade”

    Profile photo of sploshsplosh
    Member
    @splosh
    Join Date: 2004
    Post Count: 15

    You could simply pay out half the loan and that would halve your interest bill making it cash flow neutral.

    Profile photo of foundationfoundation
    Member
    @foundation
    Join Date: 2005
    Post Count: 1,153
    Originally posted by splosh:

    You could simply…

    [stun]

    Simply? Wayne’s a lucky bloke if he has a lazy $225,000 sitting around that he can plonk into his loan!

    Profile photo of sploshsplosh
    Member
    @splosh
    Join Date: 2004
    Post Count: 15
    Originally posted by foundation:

    Originally posted by splosh:

    You could simply…

    [stun]

    Simply? Wayne’s a lucky bloke if he has a lazy $225,000 sitting around that he can plonk into his loan!

    Yes, tounge was planted somewhat firmly in cheek, ….but seriously he could possibly sell another IP and consolidate.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    Originally posted by splosh:

    Originally posted by foundation:

    Originally posted by splosh:

    You could simply…

    [stun]

    Simply? Wayne’s a lucky bloke if he has a lazy $225,000 sitting around that he can plonk into his loan!

    Yes, tounge was planted somewhat firmly in cheek, ….but seriously he could possibly sell another IP and consolidate.

    I think he only owns one I.P

    Cheers,
    Marc.
    [email protected]

    “we get sent lemons; it’s up to us to make lemonade”

    Profile photo of Paul DobsonPaul Dobson
    Participant
    @pauldobson
    Join Date: 2003
    Post Count: 1,196

    Hi w1ward

    My wife and I have recently turned three different negatively geared properties into positive cashflow for our clients.

    We do this buy selling the properties with Vendor Finance. We structure this type of sale so that you receive positive cashflow until the new buyers refinance out of your Vendor Finance, into a traditional loan. This process usually takes two to three years.

    Obviously this won’t be attractive if you don’t wish to sell the property but, if this is an option for you, your sell price is fixed at the begining of the transaction and your IP generates positive cashflow.

    I hope this helps.

    Cheers, Paul

    Paul & Karen Dobson
    negative2positive
    Turn your negatively geared property into positive cashflow.
    Phone: (02) 4984 9540

    Talk to us about Wrap Training Joint Ventures.

    Paul Dobson | Vendor Finance Institute
    http://www.vendorfinanceinstitute.com.au
    Email Me | Phone Me

    An alternative way to finance your home.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674

    Add a garage if it has a carport . Add an extra bedroom by splitting a room. Add a pergola or Deck . Increase value and increase rent !!
    Rent out furniture to tenant ,
    Haven’t done this myself just read the theory on it.

    Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of Cherry ProCherry Pro
    Participant
    @cherry-pro
    Join Date: 2007
    Post Count: 22

    Hi Wayne

    Know the feeling as we’re in a similar situation – having bought
    brand new in Hornsby 4 years ago and our rent is now down
    substantially over what the rental guarantee promised. And the
    difference between the rent and interest costs is prohibitive.

    Any other ideas of how we can turn our situation around.

    Thanks, in anticipation.

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