What will you do when/if negative gearing goes?

Discussion in 'Investor Psychology & Mindset' started by propernewb, 13th May, 2016.

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  1. HUGH72

    HUGH72 Well-Known Member

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    Not necessarily, for a renter to become a owner 3 things are required: a decent deposit, stable income and serviceability.

    A market collapse would scare off as many, if not more FHBers than investors despite the bravardo as they are the most vulnerable purchasers with small deposits and limited equity.

    The most vulnerable would be left looking for rentals with rental auctions a possibility in some cities.
     
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  2. emza

    emza Well-Known Member

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    I really can't understand the mindset that claims supply will diminish.

    The renters + owners to housing supply equation doesn't change because of price changes. Houses don't vanish. They're a PPOR, a rental or vacant.

    If prices crashed and an investor was forced to sell, that buyer is either OO or investor - and would lease it out.

    The only scenario were supply reduces is if existing homes are made and left vacant.

    I really feel like a lot of people on this forum don't understand what will happen if investors leave the established home market.

    If those 93% of investors departed, the supply is unchanged. Prices reduce until a buyer appears. That is an OO or an investor.

    Any of those investors join the new build market we get increased supply.
     
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  3. HUGH72

    HUGH72 Well-Known Member

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    Investors aren't forced to 'do' anything.

    I won't be leaving the established housing market either way.
     
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  4. Sackie

    Sackie Well-Known Member

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    What will you do when/if negative gearing goes?

    Celebrate the end to NG threads!
     
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  5. LibGS

    LibGS Well-Known Member

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    You gotta take up space.
     
  6. Lizzie

    Lizzie Well-Known Member

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    If? Nothing. All ours are positively geared
     
  7. Angel

    Angel Well-Known Member

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    Emza, have you read all the NG threads we wrote in 2015? We have done this equation to death. Current investors are not affected by Labor's plan, except in how it will affect the entire economy. We keep our + or - status as before. But you seem to think we will rush off and start to buy new houses in the boonies, but we wont. We don't buy new houses in the boonies now and we wont next year either, because generally they make for a bad investment. I think you might be the one who doesn't understand.
     
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  8. Angel

    Angel Well-Known Member

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    Hi Bayview. How is your new house, got any photos to share yet?
     
  9. Azazel

    Azazel Well-Known Member

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    I'm guessing there will be a rush to buy before the deadline if the changes are grandgathered...
    Ironically, that would drive up prices in the short term.
     
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  10. HUGH72

    HUGH72 Well-Known Member

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    Que...?
     
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  11. bobbyj

    bobbyj Well-Known Member

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    Does that mean we can increase rents on all our properties, despite our negatively geared properties being 'grandfathered' and then using the excuse that negative gearing is gone. "Blame the Labor party..."
    I agree that it will be very interesting.

    Either way, will make lemonade from the lemons handed to us.
     
  12. emza

    emza Well-Known Member

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    Aren't some of you on an investment journey that involves buying established homes and negatively gearing them against wages?

    That particular strategy would end and CGT discount would be ended and so the sums would no longer work for some investors.

    Unless you're ceasing buying after the cut off, it would affect your future investments. No NG and the increased CGT means what was once profitable may no longer be.

    Where did I write that investors would "rush off and start to buy new houses in the boonies"? I think perhaps you're thinking of someone else because I never said or implied that.

    I do think that some percentage of investors will exit the established house market and enter the new build market however so they can continue to NG.
     
  13. Bayview

    Bayview Well-Known Member

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    Not all investors are looking for a NG property. Most can only service one maybe two if they are - which won't get you very rich in terms of cashflow for a very long time. Most want to buy one that will hopefully go up in value, will hopefully have rents go up over time, so they can live off the rents and/or sell later on to fund their retirement.

    This would apply to the vast majority I suspect. The result would be it will scare investors off, un lss they can afford to buy a new townhouse build in the established suburbs. This will also shut a lot of investors out because the entry level cost will be too high, and the neg cashflow to high for many. They will be left with the new builds in the far-flung new estates, and we will see a glut of rentals in those areas if they buy.

    I agree. Result is less folks buy property (prices level off or possibly drop) and stock market booms. Of course; if the house prices level off/drop, and the rents go up a lot as is predicted by some; then we will see a nicer return (about frickin time) on rents. This might encourage more investors back into the market, which will create a short-term price boom again until the ret returns become crap again and the neg cashflow scenario returns again.

    The result will be; short term drops immediately after NG/CGT changes, rents go up, then a short term boom again, then another price slump....the rents won't go down through all this though; so more renters will be coughing up more, and still not being able to gain much foothold of savings for their purchase.

    You didn't write that; but it is obvious to me and others that this will be the only choice for many investors - the majority of whom own one IP. Most cannot afford an expensive above the median one in a highly sought after established area - especially with horrible neg cashflow. They will be forced to buy in the "tract home" estates out on the edge of humanity, and we will see a glut of rentals with few renters to live in them. It''s going to be like the apartment over-supply we see in the Cap cities from time to time.

    I agree, but only those investors who can only afford the below median price point properties. This is the largest pool of rental properties as well, and the largest pool of renters. Anyone who is already in IP's and is already pos geared/pos cashflowed won't be looking to buy in these areas, unless they are wanting to offset a pos cashflow property with an neg cashflow one.

    How many investors are in this group? Very few I suspect.
     
    Last edited: 15th May, 2016
  14. Bayview

    Bayview Well-Known Member

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    No new house on the property as yet. We currently still have a tenant in the existing house, and plan to continue this way until her lease runs out in Oct next year...looking to hopefully start the building process about then. Have been doing a bit of prelim discussions and selecting of things for the possible new house build already.

    Now that all our business debt and every other debt has gone (except for the loan on this new property purchase), we still have our other IP and the business, so the cashflow is finally in a decent positive state, we have been saving like there is no tomorrow and are going to have to continue doing so knuckle down and save really hard over the next year and a half to decrease that loan and accumulate a lot of equity and serviceability for another loan for the rebuild.

    Never thought I would be buying a new PPoR with a loan attached at aged 55, but; life's a journey and that's where the the fun and adventure is.
     
    Last edited: 15th May, 2016
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  15. jins13

    jins13 Well-Known Member

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    For me, it wouldn't make any difference as the next purchase is going to be very soon and will be out of the game for a while. Will reassess the environment and adapt accordingly.
     
  16. LibGS

    LibGS Well-Known Member

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    From Bill Hicks...he would argue with his brother and say to him, "I don't have to do anything if I don't want to". His brother responded, "Yeah you do, you gotta take up space."
     
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  17. Angel

    Angel Well-Known Member

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    Good morning!

    Firstly we are not on an investment journey that involves buying established homes and negatively gearing them against wages, as though that in itself is the end goal. Just clarifying. We buy established homes in places where a large tenant pool of people want to live, and where we are expecting future capital growth to make it worth our while to hold these properties over and above all the hassle and initial costs. Negative gearing helps those of us on low incomes to carry the costs for a few years while the rents catchup until they become neutral or positive cash flow. Depreciation and NG are icing on the cake, not any really significant factor in our purchase choices. When I bought our IPs it was expected that they be NG for a couple of years only. The goal has always been to make money and not be a drain on the govt when we retire, not to reduce paying tax.. I must be a very stupid person because all of our properties are in Qld. The year after we bought the IPs, the Qld economy crashed and we are sitting around waiting for their values to grow so that we can finally make some money, as was the initial plan.

    Point 2. Sorry Emza, my apologies. I see now that you didn't say that specifically. I had interpreted you being in the camp of people who want NG abolished because they naively believe that by abolishing NG, investors will rush out and start building new homes. Bayview and I were pointing out that this result will not occur. Sorry to disappoint the Triple J listeners and Get Up.
     
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  18. sash

    sash Well-Known Member

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    Noice and congrats...sow where did you buy for a new PPOR...did you stay in Mornington Peninsula?
     
  19. LibGS

    LibGS Well-Known Member

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    This. This is the sort of crap people post on this forum that is snide and unnecessary. Disapointed in you Angel.
     
  20. Bender12

    Bender12 Well-Known Member

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    Supply will be limited because investors will not invest in new builds either because CGT discounts will decrease to 25%. Plus as an investor, why would you buy a new property knowing that it would become unattractive to potential investors(they cannot negative gear) when you need to sell? It's like buying a new car. The values decreases as soon as you drive it off the lot.

    This would only mean one thing. New constructions will come to a halt and rents go up due to restricted supply.

    Current investors who are grandfathered will be more inclined to hold onto their properties rather than selling. Why get rid of a good thing?
     
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