NSW Do you buy negatively geared?

Discussion in 'Property Analysis' started by Alex123711, 23rd Apr, 2019.

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  1. Alex123711

    Alex123711 Well-Known Member

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    If so how much is acceptable amount to be in the red?
     
    Alex123711, 23rd Apr, 2019
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  2. wylie

    wylie Moderator Staff Member

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    How long is a piece of string. Every time we bought a house we were negatively geared. Not because we wanted to be, but because we didn't have enough deposit to make it positive from day one.

    As the loans decreased and the rents increased, this changed.

    How much "in the red" is acceptable depends on your own circumstances. Nobody can tell you that.

    Many will say it is not good practice to be negatively geared, but even without the tax break it brought us whilst we paid down the loan, we still would have bought when we could.
     
    wylie, 23rd Apr, 2019
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  3. kierank

    kierank Well-Known Member

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    It is very much dependent on one’s risk profile.

    And every one’s risk profile is different.

    I have a younger sister who has a very good job (including good pay) and she hates debt, even good debt.

    On the other hand, I am retired, I love using OPM, have more good debt in retirement than I had when working, ...

    Totally different risk profiles.

    The main thing is we both sleep well at night.
     
    kierank, 23rd Apr, 2019
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  4. jazzsidana

    jazzsidana Well-Known Member

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    This shouldn't even be a question tbh.

    Work out a strategy first based on your personal/financial situation with help of broker/accountant.
     
    jazzsidana, 23rd Apr, 2019
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  5. Alex123711

    Alex123711 Well-Known Member

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    Obviously what you can afford is the main point, but what % would you be unhappy to pay more than.. even if you could afford
     
    Alex123711, 23rd Apr, 2019
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  6. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Are you asking:
    1. do you buy negative cashflow?
    or
    2. do you buy negatively geared?

    They are not one and the same. You can buy a positively cash flowed property and claim negative gearing benefits from the ATO to reduce your taxable income.

    My preference would be for things to pay for themselves and it all depends around LVRs etc but I would be happy to be $5-10k out of pocket per annum for the right property income producing asset.

    To be honest I have properties that are $20k out of pocket as they are vacant land/development sites but it doesn't worry me too much as it's short term pain for the long term gain.
     
    Westminster, 23rd Apr, 2019
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  7. The Y-man

    The Y-man Moderator Staff Member

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    Our current resi portfolio is -ve cashflow by about 30% of our household gross income. I think this is about the level it has always been. To put in perspective however, our current total living expenses (no rent / paid off PPOR) is about 20% of total household gross income.

    The Y-man
     
    Last edited: 23rd Apr, 2019
    The Y-man, 23rd Apr, 2019
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  8. Tonibell

    Tonibell Well-Known Member

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    At one stage we were about $70K per annum in the red for about 4 years - not that I would every recommend that or want to be there again ! Chewed through our cash reserves like you wouldn't believe.

    However it was part of an approach that worked out in the end - we renovated, put up granny flats, interest rates came down, property boomed and it all worked out.

    But ...... never going there again.
     
    Tonibell, 23rd Apr, 2019
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  9. MTR

    MTR Well-Known Member

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    Amen
     
    MTR, 23rd Apr, 2019
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  10. MTR

    MTR Well-Known Member

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    I think negative gearing is a dirty word, it serves no purpose in current climate, other than cause pain.

    For me I am not interested in holding any properties that are negatively geared unless its a short time frame and am developing/adding value or its a rising market with a view to offloading and cashing out
     
    Last edited: 23rd Apr, 2019
    MTR, 23rd Apr, 2019
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  11. Alex123711

    Alex123711 Well-Known Member

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    Have you found many positvely geared properties?
     
    Alex123711, 23rd Apr, 2019
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  12. MTR

    MTR Well-Known Member

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    Not in oz unless you develop and sell
    Down
     
    MTR, 23rd Apr, 2019
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  13. The Y-man

    The Y-man Moderator Staff Member

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    ...or Comm Prop

    The Y-man
     
    The Y-man, 23rd Apr, 2019
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  14. AlbertWT

    AlbertWT Well-Known Member

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    It's all depends on who won the election after 18th May 2019 :eek:.
     
    AlbertWT, 24th Apr, 2019
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  15. MTR

    MTR Well-Known Member

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    Yes, @Beano

    Problem with negative gearing is it creates a great deal of stress, even if you can manage the debt. Paying debt is not fun, but this is all most investors know or do.

    One thing Steve McKnight did for oz investors is to open eyes to possibility of growing cashflow using other strategies...
     
    MTR, 24th Apr, 2019
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  16. kierank

    kierank Well-Known Member

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    Even if the ALP wins, one still has 7 months to buy a negatively geared property if one so desires.
     
    kierank, 24th Apr, 2019
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  17. wylie

    wylie Moderator Staff Member

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    I'd say it causes stress only if you've stretched yourself, not if it has been undertaken in full knowledge and understanding of how it will affect (or not) your individual circumstances.
     
    wylie, 24th Apr, 2019
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  18. kierank

    kierank Well-Known Member

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    There are many ways that one can “skin the Net Worth cat”.

    The one I particularly favour is OPM and especially negative gearing. It has never caused me any stress, even though we have used it with property for around 40 years.

    We retired nearly 9 years ago and we have more (good) debt today than in any other times in our lives.

    To me, negative gearing is like driving a race car. If one don’t know how to use it correctly, it can be very dangerous; if one take the time to learn how to use it, one can get to their destination a lot quicker.

    Totally agree. I would rather I never paid down (good) debt but I feel our banks might want us to do so, at some time in the future.
     
    kierank, 24th Apr, 2019
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  19. MTR

    MTR Well-Known Member

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    Maybe ? Maybe not? Its a property forum... its always sunshine and lolly pops.

    There are plenty of things that investors can not control...… ie change of government for one... its a biggy, change of policies- negative gearing, change of financial policies - interest only to P&I, rents decreasing, we are now seeing oversupply in many market... ouch. Many investors don't realise that rental demand is all about supply vs demand, and even our largest cities are already feeling the pain


    It will most certainly impact on investors bottom line.... ….. stress..... so what investors are out of pocket today, could be significantly more tomorrow.

    Conclusion - don't buy negatively geared properties unless there is upside in a short time frame.
     
    Last edited: 24th Apr, 2019
    MTR, 24th Apr, 2019
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  20. MTR

    MTR Well-Known Member

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    Exactly.... who the hell is voting Labor:p
     
    MTR, 24th Apr, 2019
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