I never have any Investment property, but i wish i can get one…
but how is possible still invest in positive gear as the interest is so high??
P
Use an adequate deposit rather than equity or 100%+ borrowings.
Scott is absolutely right!
They are pretty hard to find at the moment with the boom in prices and now the spike in interest rates.
- A big deposit helps.
- Buy a house where you could subdivide off the back yard and sell it reducing your debt
- Mining towns have some absolutely shocking houses which hard mining types will happily rent out for good money due to accomodation shortages. WA and QLD mining towns worth a look. You will have to sort through hundreds of towns and houses. Don't give up if you don't find one in an hour. It might take you weeks. DETERMINATION
- Commercial real estate is worth a look. Buy shops and charge better rents to businesses
- Buy property where your business can rent and get your business to pay the debts and hopefully earn you money
- Buy a large block and do a strata title and keep a few if possible for yourself (eg build 5, sell 3 and rent the other two out)
- Renovate and increase the rent
good idea
Hi Terrance
You need to think about why you want to buy the Investment property?
Generally the properties that are more likely to be positively geared aren't likely to increase in value as much
as a negatively geared property. Like Chis said, you may be able to find a positively geared property in a rural/mining town – but in 10 years time the property might be worth even less than when you bought it.So obviously positively geared properties in Australia are great for your short term cash flow but not so great for your long term capital gains. Obviously this isn't always the case – but its generally true
Good luck
The reason why property investing works for many is that it is a forced savings plan using the tenants money, the investors money and in most cases the investors tax money (negatively geared).
As already stated, to have a positively geared property the income from the property needs to be more than ALL the expenses of the property, as most rental yields are still under 5% and interest rates are at about 9.5% you need to have enogh cash for a deposit that is over half the property purchase price plus costs. That is the issue for most – they don't have any cash to invest that is their own and not someone elses. Depending on your marginal tax rate you might actually need a lot more deposit as for many now on the 30% tax rate $70 per $100 of interest is raw investment cost.
Maybe try teaming up with some other investors – have a good investor agreement though!!
There is hope – just think outside the square!
so…i would reckon is not a good time to buy property this year though……example in Perth.only 1-3% increment from last year.
Iet say 100% loan from bank based on interest rate 9% minus net rental return let say 4%.
it actually making lost!!!!!! and more headache…!! esp now u can put on term deposit for 8.7% for one year. and is much better return.
if really want to find those provide reasonable growth area approx 10-15%. which really need to take risk and deep research.
I would reckon wait for few months and see how RBA react the interest rate..
Back in old days (not long time ago), people who earned 50-60k will hit the highest tax margin 46.5%.
That was why people took lots of negative gearing during that period to minimise the tax (And lots of spruiker as well).
Nowadays, you need to earn more than 180k before you hit the highest margin (I think only 2% of population). So from the tax point of view, if you think that investing is just to save tax…. you need to think 10 times….i wont think to save tax as still need to pay tax anyway……no matter how.. you cant escape TAX MAN.
thats why i am looking for reasonably nagative gear..or may be even..that woudl be an idea investment…
too much nagative gear…will make you pain….
any good area to invest in melbourne Victoria????
You can get _closer_ to positive gearing by either reducing your ongoing costs and/or increasing your income.
Reducing costs can include:
1. Performing maintenance yourself (obviously where legal to do so!)
2. Not using a real estate agent (see my signature below) for property management
3. Correctly claim any depreciation allowances availableIncreasing your income can include:
1. Increase rent. Can be justified by providing new/upgraded facilities (ie reno)
2. Subdivision, leading to more rentOf course, once you've sorted these out, you would apply to the Tax office for a ITWV (Income Tax Withholding Variation) so you receive the benefits of your negative gearing immediately, rather than end-of-year.
Positively geared properties ARE out there. You just need to look.
Earlier this year I sold an existing 1br apartment in the CBD for $200,000. It was renting at $300pw and had never been vacant.
Right now I am building a couple of houses that will sell at about $230,000 and will rent at about $280pw. With depreciation on a new property that is just about positively geared.
They are out there. I remember my first post on this forum back in 2004 when I basically asked the same question. I just wasn't looking properly. Since then I have bought and sold over 20 positively geared properties.
Cheers
K
There were even a couple in this week's Realtor magazine – Western Sydney suburbs with rail line, 3 bed house + granny flat. You just have to interpret what is on offer, maybe do a little bit of work eg add a bedroom/knock down an internal wall but it is achieveable.
hi Linar,
would you mind if i ask what your strategy is with property investing?
do you not keep positive geared properties?
don't mean to be nosey, just curious/interested.
thanks,
frosty1Think outside the square – if you want cashflow positive property, read steve's bit on lease options, under "investor HQ". Buy low and sell higher (usually a little higher than market value). Lease options are really a low-doc loan from you to the buyer, so you can charge a higher interest rate than you are paying to the bank – that's where your positive cashflow comes from. IMPORTANT TIP THOUGH – MAKE SURE YOU FIND A SOLICITOR THAT KNOWS THESE KIND OF DEALS TO DO UP YOUR CONTRACTS!!
Hi Frosty
Our investing strategy has changed over the years. Just over 4 years ago we started buying positively geared property in Darwin and also in a Qld mining town. We sold out of the mining town because, although we were getting a 10% return, dealing with the property manager was more hassle than it was worth. Darwin property prices went through the roof so we decided to sell up and pocket the cash. Darwin is a funny old town. You can have magnificent houses next to a housing trust slum. There is no one fantastic street or suburb in Darwin (except the new suburbs). We bought old units that were getting a very high yield, but they weren't quality stock, that is, something I was prepared to hold on to for the next 20 years. I felt that Darwin had seen most of the growth it was going to see for a while so my husband and I took our money. Even at the price I sold them, those units are still positively geared.
We have now both quit work and are full time developers/investors. Generally speaking, there is more money for us in building than buying established houses. The houses I am building I would normally keep for myself and rent them out but we have overextended ourselves a bit financially this year and want to consolidate our position. We have a couple of young little kids and I am tired of saying to them "I'll be with you in a minute". I just want to be with them while I can. So I am currently selling out of most of our stock and chilling out for a while.
Horses for courses. I started out being a strict adherent to Steve McKnight's positively geared strategies but along the way I found a combination of strategies that worked for me.
PM me if you want more detailed info.
Cheers
K
They are around. One im looking at now has a 2 bed house with 2 commercial buildings attached. Total rent potential $450 to $500 pw befor reno plus it is on a corner block of over 1000 sqr with subdivision approval. Asking $240,000 and open to offers.
Something that's working investment wise over here in NZ at present to create +CF is Lease Options.
Example:
Purchase property at $220K, with 20% deposit into a GST registered Trading Trust
onsell at $260K with a 3-year lease to tenant buyer.
Collect $5000 non-refundable option fee up front,
collect $520 rent and option payment weekly,
give $100/week rent credit.Yearly cashflow = $8,370 and
net margin at sale in 3 years = $23,850 or 128% ROI.For more info on deals like this, PM me.
Sounds like NZ is a wee bit behind the times.
We have been actively doing this in Qld for 12 years now.
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
