Hello all,
This may sound like a silly question, but when is a property considered to be positive geared? Is it when the rent covers the loan repayments, or does it have to cover all expenses. Eg, loan repayments, council rates, land tax, etc.
Thanks in advance
Joseph
Hi Joseph,
Not a silly question, a property is positively geared when all expenses of the property are covered by the rental income. Rates and land tax are an expense of the property and therefore a tax deduction which if the rent does not cover then puts you into negative gearing as you have to add money to the investment to keep it active.
Ideal positive gearing is when all the expenses are covered, loan repayment, rates, taxes etc and you also get extra income for yourself!Cheers, Future Wealth
Thanks future wealth. When you think about it there is so much expenses associated with property. Land tax, council rates, insurance, water rates, the list goes on.
Not so bad, the tenant pays the water rates!
You just need to invest in a high growth area with great rental return!
Doesn’t tenant only pay water usage? Landlords pay the rates. Unless It’s different for Victoria?
Sorry, tenant pays usage of water hence in NSW I call it water rates, owner pays council rates.
As mentioned a positively geared property is one where the rent covers ALL the outgoings. Some people like to convince themselves that a property is positively geared by only counting the interest on say 80% of the loan (what they borrowed) and not including the deposit (which still comes at a cost) and purchase costs. I count ALL costs.
But a property can be negatively geared but positive cash flow due to depreciation and tax breaks.
Makes sense catalyst. Thanks
Jmsrachel, what are you looking to do?
Don’t be scared about property and the costs. You have to think of it like a business. As long as your income is better than your out goings then you’ll be fine. Is all in the numbers.i love positively geared property… they put money into your pocket – not take money from it
Those are my ideal investments.. i also agree with thinking about it as a business. the name of the game is to make money!
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