Positive Cashflow vs Negative Gearing
December 22nd 2008 10:18
The age old question in property investing - what is best - Positive Cashflow properties or negative gearing? Ask 100 different experts this question and you will almost certainly get several different answers. The answer is not as simple as you might think as every different person and couple has different circumstances. It also depends on each individuals goals.
There is no doubting that the quickest way to make a large amount of money with property is through increases in market values. You need to either be able to rely on the market increasing, or making significant improvements to the property - or both. The majority of properties that fall into this category will be located within highly populated areas (eg capital cities) and will more often than not be negatively geared. Now whilst these property have the best chance of high capital gains and may suit people within the high income tax bracket - they are not going to help you replace your income and retire sooner.
Positive cashflow properties generally do not have as high capital growth prospects but provide you surplus income after paying for all your expenses (including loan costs, council rates etc etc). A lot of investors shy away from this form of investing because it means they have to pay more tax at the end of financial year. My question is - would you rather pay tax on a profit, or get a tax discount on a loss? The answer is a pretty easy one for me....
Finding the right property is crucial. You want to find a property that will give you cash in your pocket each week whilst also growing at an above market rate. An increase in market value can allow you to either realise this gain by selling or refinancing your loan to unlock the equity to use for further investing.
Obviously there is no correct answer or strategy for each individual. For most people, a mixture of the two would be a good way to go. Most investors look at property to help secure their financial future. It would be every Australian's dream to be able to retire early - a great way to do this is to supplement your income with positive cashflow properties. If you have enough positive cashflow properties to replace your wage then you can retire and use the capital growth as a bonus! There are many great prospects out there that can help you fast track your wealth and assist you in retiring early. The key is in your property selection. Capital growth is definitely important, as this is where you will make large amounts of money in the long time. Finding a property that is going to put cash in your pocket in the short term as well is where most people come unstuck.
Do your research and don't give up easily. Positive cashflow properties in growth areas do exist - you just have to do your due diligence and look in the right places! Good luck!
Matt McLean
AUSSIE INVESTMENT PROPERTIES
'Taking the hard work out of finding the best perfoming investment properties in Australia'
aussieinvestmentproperties@ya hoo.com.au
Click Here to For More Info
There is no doubting that the quickest way to make a large amount of money with property is through increases in market values. You need to either be able to rely on the market increasing, or making significant improvements to the property - or both. The majority of properties that fall into this category will be located within highly populated areas (eg capital cities) and will more often than not be negatively geared. Now whilst these property have the best chance of high capital gains and may suit people within the high income tax bracket - they are not going to help you replace your income and retire sooner.
Positive cashflow properties generally do not have as high capital growth prospects but provide you surplus income after paying for all your expenses (including loan costs, council rates etc etc). A lot of investors shy away from this form of investing because it means they have to pay more tax at the end of financial year. My question is - would you rather pay tax on a profit, or get a tax discount on a loss? The answer is a pretty easy one for me....
Finding the right property is crucial. You want to find a property that will give you cash in your pocket each week whilst also growing at an above market rate. An increase in market value can allow you to either realise this gain by selling or refinancing your loan to unlock the equity to use for further investing.
Obviously there is no correct answer or strategy for each individual. For most people, a mixture of the two would be a good way to go. Most investors look at property to help secure their financial future. It would be every Australian's dream to be able to retire early - a great way to do this is to supplement your income with positive cashflow properties. If you have enough positive cashflow properties to replace your wage then you can retire and use the capital growth as a bonus! There are many great prospects out there that can help you fast track your wealth and assist you in retiring early. The key is in your property selection. Capital growth is definitely important, as this is where you will make large amounts of money in the long time. Finding a property that is going to put cash in your pocket in the short term as well is where most people come unstuck.
Do your research and don't give up easily. Positive cashflow properties in growth areas do exist - you just have to do your due diligence and look in the right places! Good luck!
Matt McLean
AUSSIE INVESTMENT PROPERTIES
'Taking the hard work out of finding the best perfoming investment properties in Australia'
aussieinvestmentproperties@ya hoo.com.au
Click Here to For More Info
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