NSW Do you buy negatively geared?

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

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  1. wylie

    wylie Moderator Staff Member

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    There are plenty of stories just here on this forum of people disclosing where they went wrong, how they are negatively geared, how they are coping with moving from IO to P&I.

    Whenever policies change, people change with them or sell something. If they are in "negative equity" that will be painful, but that is different to negative gearing.
     
    wylie, 24th Apr, 2019
    #21
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  2. MTR

    MTR Well-Known Member

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    Investors adapt? There is no choice.
    The consequences and pain will differ?? But the outcome will be the same ... stress

    If investors want to knock themselves out today buying negatively geared properties to hold in a flat/falling market then good luck with that strategy, they will need it.
     
    Last edited: 24th Apr, 2019
    MTR, 24th Apr, 2019
    #22
  3. kierank

    kierank Well-Known Member

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    Totally agree
     
    kierank, 24th Apr, 2019
    #23
  4. wylie

    wylie Moderator Staff Member

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    Of course there is no choice. People adapt to all sorts of changes in their lives, property related, financially related, health related.

    And like @kierank, being negatively geared has never stressed us. Perhaps he and I are unlike any other investors. :rolleyes:
     
    wylie, 24th Apr, 2019
    #24
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  5. MTR

    MTR Well-Known Member

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    That's good, load up.

    For new investors buying today it may be a tough gig, I would never recommend newbies buying negatively geared properties in a property cycle which is flat or falling, especially with current credit squeeze environment, unless they had a particular skill set ie adding value, developing, or where they could significantly increase rental yields.. otherwise they will be holding negatively geared properties and paying back debt...… Stress or worse, lose money.

    Back to negative gearing.... do investors feel lucky?

    Will rents keep rising or falling
    Will Labor get in or Liberal
    Will credit squeeze continue?
    Will markets continue to fall or rise
    Will interest rates fall or rise
    Will market sentiment stay negative or positive
    Will Australian economy slip or prosper
    Will Australian dollar continue to go south

    Finally what stopped the boom cycles in Sydney and Melbourne? has anything changed today?
     
    Last edited: 24th Apr, 2019
    MTR, 24th Apr, 2019
    #25
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  6. kierank

    kierank Well-Known Member

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    Totally disagree
     
    kierank, 24th Apr, 2019
    #26
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  7. wylie

    wylie Moderator Staff Member

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    Agree with the first bit. But nobody has suggested that newbies do this.

    There is a place for negatively gearing, used wisely.

    As for the rest of the questions, I don't see how this is different to the sometimes wildly fluctuating market conditions that I've experienced since buying my first IP roughly 40 years ago. The only constant is change.

    Work with the changes, change tactics if you need to.

    We stretched ourselves in the early days, with eyes very much open to the risks. We had fallback plans should things go wrong.

    And as @Marg4000 recently said in another thread, we are sometimes amazed at what we've built up without really trying that hard (on one average income and without doing without necessities, though at times we couldn't afford any luxuries).

    We are still negatively geared, but that will change soon as we develop our block.

    And I believe there is still a place for negative gearing in the right circumstances, as always. And you've hit the nail on the head earlier with the times this can still work.
     
    wylie, 24th Apr, 2019
    #27
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  8. MTR

    MTR Well-Known Member

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    Post 8, pretty much sumed up my thoughts on negative gearing.
    If investors have been able to create income streams from this strategy then it worked for them, that’s great

    The original post was about what is acceptable, my comments are based on property markets today and why I would not buy negatively geared properties today

    What worked for investors 20 years ago may or may not work today for obvious reasons
     
    Last edited: 24th Apr, 2019
    MTR, 24th Apr, 2019
    #28
  9. wylie

    wylie Moderator Staff Member

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    @MTR I think we agree that what worked 20 years ago may not work today. But it also may still work, depending on the investor, their level of risk, level of borrowing overall, reason for being prepared to buy a negatively geared property.

    There are too many variables for any one single answer. And to say that there is no place for negatively geared properties in this market is wrong. It still has a place in some portfolios.
     
    wylie, 24th Apr, 2019
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  10. MTR

    MTR Well-Known Member

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    Unless I am developing to make money or buying in rising market I personally wont be interested in negatively geared properties, I just dont see the point. Just saying

    The thing is most Oz resi property is negatively geared, that’s just a fact and Returns are always calculated on gross, and net is what matters

    Most investors wont have a choice with regards to neg props, but they can choose when they buy (timing) and thats what matters the most imho... and thats another thread another day
     
    MTR, 24th Apr, 2019
    #30
  11. kierank

    kierank Well-Known Member

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    It is my portfolio :eek:.
     
    kierank, 24th Apr, 2019
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  12. wylie

    wylie Moderator Staff Member

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    It also has an important place in ours @kierank and for the right property, I'd buy another negatively geared property now, but we are not in accumulation phase, so it is not something we even need to consider.

    I think the confusing thing for some (possibly newbies and those starting out) is that one negatively geared property doesn't make the whole of one's holdings negative, nor push one into negative equity.
     
    wylie, 24th Apr, 2019
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  13. kierank

    kierank Well-Known Member

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    Same here.

    In fact, since we retired 9 years ago and stopped accumulating, we have bought $3M worth of IPs, all hugely negatively geared.

    Even if interest rates doubled to a low 8%, we would be fine.

    It is all about having good cashflow (outside of property) and having great cash reserves.

    I am amazed how many people, both newbies and experienced, don’t seem to understand this.

    And the other thing is that people don’t track Net Worth.

    The value of one’s assets (including property) can go up and can go down over time.

    One’s debt can go up and go down over time.

    Who cares?

    I don’t as long as our Net Worth keeps going up.

    I have tracking our Net Worth every Quarter for the last 15 years (since December 2003) and it has been going up and up (obviously not in a straight line).

    If we didn’t use negative gearing, we would be a lot worse off today.

    It is that simple.
     
    kierank, 24th Apr, 2019
    #33
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  14. Herluf

    Herluf Active Member

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    It seems you know your topic Kierank. I'm a complete newbie...today is day 1 actually and I see you also live in Brisbane. You keen to pass on some of your knowledge to a newbie? My shout for lunch.
     
    Herluf, 29th Apr, 2019
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  15. The Y-man

    The Y-man Moderator Staff Member

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    tonight.

    The Y-man
     
    The Y-man, 29th Apr, 2019
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  16. kierank

    kierank Well-Known Member

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    kierank, 29th Apr, 2019
    #36
  17. kierank

    kierank Well-Known Member

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    PM me if you want to catch up.
     
    kierank, 29th Apr, 2019
    #37
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