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That's exactly what I learned with my first investment property. My wife and I only borrowed 1/3 of the value. A few years in, it started to hit me that we were actually out of pocket more than the refund I received from tax return. This was pre-covid time and we were paying around $25000 bank loan interest. At tax time, we only received around 12000 refund combined, so you do the maths. So we paid off the loan as quickly as possible and are now positive gear. Yes, we pay addiitonal tax but not $25000 for both of us, or more in current cash rate.
Hi PK, can you please elaborate on the numbers we had to pay back to the ATO when selling the properties if the properties have a depreciation schedule. Thanks
Most residential property in Australia is negative geared PK - especially if you are buying property with land & house. No property's rent entirely covers the total costs of ownership of that property - it is super rare.....
@@AusPropertyMasteryWithPK are those stats referring to the time of purchase or all investment properties, such as properties which have been held for long periods of time and switched from negative gearing to positive because rent went up over time or because the principle was reduced?
This depends; if you have a large mortgage for a personal house and a negatively geared property it pays to pay off the personal house first as your paying a large amount per month with no tax refund at all on the personal. This situation is for those who had a house but took equity out to buy a new house and kept their old one to rent out. This scenario you would evade selling/buying costs for a positively geared new property after selling the old one. I think what I just wrote is actually most peoples situation
yeah i understand you would have to make sure the property your buying using the equity from your payed off main house is positive gear or at worst you may need to add 50k-100k to reduce the loan amount to make it positive, mainly because now house prices are alot more then they were 3 years ago and also interest rates are through the roof
I have a negatively geared property. Always felt wrong to me, but in 2023, i was told it was impossible to get growth and positive geared. Still have some leaning to do...
Thanks PK. An insightful video. On another hand, with positive cashflow properties, will this not then become taxable income? And when you said half of the depreciation needs to be paid back when you sell the property, was this in relation to CGT or something else? Thanks again for the video!!
yes it would be taxed. so you would pay more tax, 30 cents for each dollar (depending on the tax rate), however you would get 70 of those cents cashflow.
It only works for senators who, earning in excess of 200k, owning at least 2 properties and receive a whopping $300 a day for every trip they make to parliament.
Is it still possible to get a property these days with such high interest rates without negative gearing. I guess a property would be negative geared for initial few years or else you would need a big down payment? Whats your thought? Thanks
combination of negatively geared and positively geared. properties that were purchased a while ago have gone from being negative to positive as rents have risen and mortgage has reduced
Another point is that one can only offset the loss if there is other income during the year. If there is no income or lower tax bracket income to what’ was envisaged at the time of purchase, it will only make things worse.
@@massimilianomarrazzo2392not always, could be loss of job for period of time and maternity leave. So one income instead 2 or non will reflect in low tax bracket
Hi Pk, all my properties are negatively geared. It's mainly because it's in Sydney and the land tax component is the biggest expense after the mortgage repayments. Sometimes it makes no sense you pay stamp duty to the federal government when you buy, then you need to pay land tax to the relevant state government when you own it, that's on top of your council rates and other outgoing. Then when you sell it you pay CGT to the federal government again.
I have property in Melbourne. I have to alot of tax every year.my tax agent said that is problem of my investment property. I dnt know what is that mean
one thing remember, Negetive Gearing can be used to reduce risk, if u keep losing money few years, but u sell it at a good price later, u can still make money back, with help of ATO to reduce the risk of running out cash. A good example, i bought a shit house, and only get very little from rent, far away from my cost each year, but one day, a developer come and offer a big $$$ to buy my land to combine with next door to build a apartment. i wont be able to make that money without the help of negetive gearing.
Negative gearing sucks especially when there are no renters available. Happened to me 15 years ago never again Don't believe scrupulous vulture real estate wealth building agents . Go positive and pay tax if you have to at least the rental ends in your pocket .
The secret of Negetive gearing most of the educator do not know as they want to keeping on spreading education rather to understand the Negative gearing's benefits and factors and financial links and tax llinks with Negetive gearing
My losses over 12 years has been about 100k, yet CG has been 500k!! seems like i am up even if sold and paid CGT, yep much better if i could make money each year, but very rare in the first 15 years that this happens with houses, certainly in Canberra. If i was positively geared then I pay more tax BUT my income would be greater so obviously this is the goal but as stated before so hard in the first 15 or so years. The depreciation is also much more powerful on houses or units built AFTER 1985 ??? i think So newer places are better in that regard.
How often can one find a positively geared property in this day and age? Add to that the rising interest rates, properties getting sold even before they hit the market and at a cost way above the asking, all you are left with is a property that is going to be negatively geared. Even so, remember someone else is paying a part of your home loan through the rent you receive. This adds to the equity overtime. Wouldn't you rather be in that situation where you could get a small portion of your loss back from tax due to negative gearing + have someone pay a part of your home loan and raise the equity in the meantime rather than be scared to invest at all and watch the value of your cash getting wasted due to inflation?
Likely if you find a cash flow positive property the capgains will be minimal. $650k property appreciating @ 7% PA. Even if you lost $400 pw over the long run your still making 20k per year. It's forced savings
Thanks PK 🙏 this advice may sound obvious at first but with so much information pushing investors to buy for negative gearing, especially from the financial industry and brokers who benefit only by selling you a loan, this advice is so good for the people
You could potentially fix the interest only period to avoid it being negatively geared however this also poses a risk if interest rate drops on the purchase amount.
Hi PK I have one investment in Melbourne which is negative gearing 800 every month and building one more under construction probably will be same negative gearing I tried to contact you and getting your emails but it asked me pay 6100 something in advance, how would someone could pay before see someone. I am interested to buy property under your guidelines next year after selling one of my Melbourne property.
Some people who watched this episode 2 years ago, who bought “positively geared” property at 2% interest rates, now is paying 6-7% and are running on loss…
I am NOT a silk worm! just kidding - thanks for the vid, agree with your principles. Negative gearing is a negative solution - something you do to claw back cash when you think you have no other better option. Positive properties are easily provable as a better solution, mathematically, systemically, and dare I say, spiritually.
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That's exactly what I learned with my first investment property. My wife and I only borrowed 1/3 of the value. A few years in, it started to hit me that we were actually out of pocket more than the refund I received from tax return. This was pre-covid time and we were paying around $25000 bank loan interest. At tax time, we only received around 12000 refund combined, so you do the maths. So we paid off the loan as quickly as possible and are now positive gear. Yes, we pay addiitonal tax but not $25000 for both of us, or more in current cash rate.
Hi PK, can you please elaborate on the numbers we had to pay back to the ATO when selling the properties if the properties have a depreciation schedule. Thanks
Most residential property in Australia is negative geared PK - especially if you are buying property with land & house. No property's rent entirely covers the total costs of ownership of that property - it is super rare.....
Actually according to ATO most investors positive gear their property.
@@AusPropertyMasteryWithPK are those stats referring to the time of purchase or all investment properties, such as properties which have been held for long periods of time and switched from negative gearing to positive because rent went up over time or because the principle was reduced?
How are they positive geared? @@AusPropertyMasteryWithPK
This depends; if you have a large mortgage for a personal house and a negatively geared property it pays to pay off the personal house first as your paying a large amount per month with no tax refund at all on the personal. This situation is for those who had a house but took equity out to buy a new house and kept their old one to rent out. This scenario you would evade selling/buying costs for a positively geared new property after selling the old one. I think what I just wrote is actually most peoples situation
Hi Marty, could you please give an example with that as I am still not clear on ur comment. Thanks
yeah i understand you would have to make sure the property your buying using the equity from your payed off main house is positive gear or at worst you may need to add 50k-100k to reduce the loan amount to make it positive, mainly because now house prices are alot more then they were 3 years ago and also interest rates are through the roof
I have a negatively geared property. Always felt wrong to me, but in 2023, i was told it was impossible to get growth and positive geared. Still have some leaning to do...
Thanks PK. An insightful video.
On another hand, with positive cashflow properties, will this not then become taxable income?
And when you said half of the depreciation needs to be paid back when you sell the property, was this in relation to CGT or something else?
Thanks again for the video!!
yes it would be taxed. so you would pay more tax, 30 cents for each dollar (depending on the tax rate), however you would get 70 of those cents cashflow.
It only works for senators who, earning in excess of 200k, owning at least 2 properties and receive a whopping $300 a day for every trip they make to parliament.
Is it still possible to get a property these days with such high interest rates without negative gearing. I guess a property would be negative geared for initial few years or else you would need a big down payment?
Whats your thought?
Thanks
Is depreciation savings need to be oaid back to ATO as Capital Gains Tax
It gets added into CGt
combination of negatively geared and positively geared. properties that were purchased a while ago have gone from being negative to positive as rents have risen and mortgage has reduced
update to this? Now that the cash rate has gone from 0% to 4.1% since this video was made?
I am glad you mentioned Toowoomba. I think I am in the right direction 😁😉
Another point is that one can only offset the loss if there is other income during the year. If there is no income or lower tax bracket income to what’ was envisaged at the time of purchase, it will only make things worse.
This issue is for investors who live overseas, right?
Thanks for sharing
@@massimilianomarrazzo2392not always, could be loss of job for period of time and maternity leave. So one income instead 2 or non will reflect in low tax bracket
Hi Pk, all my properties are negatively geared. It's mainly because it's in Sydney and the land tax component is the biggest expense after the mortgage repayments. Sometimes it makes no sense you pay stamp duty to the federal government when you buy, then you need to pay land tax to the relevant state government when you own it, that's on top of your council rates and other outgoing. Then when you sell it you pay CGT to the federal government again.
Hi, still don't follow about state land tax
Thanks for the info. You are a legend brother sharing honest facts not lies. Good on you.
Thanks for that that really makes alot of sense
I have property in Melbourne. I have to alot of tax every year.my tax agent said that is problem of my investment property. I dnt know what is that mean
Yes I have negative geared property for tax purposes
one thing remember, Negetive Gearing can be used to reduce risk, if u keep losing money few years, but u sell it at a good price later, u can still make money back, with help of ATO to reduce the risk of running out cash. A good example, i bought a shit house, and only get very little from rent, far away from my cost each year, but one day, a developer come and offer a big $$$ to buy my land to combine with next door to build a apartment. i wont be able to make that money without the help of negetive gearing.
Great job!
Great video
Negative gearing sucks especially when there are no renters available. Happened to me 15 years ago never again Don't believe scrupulous vulture real estate wealth building agents .
Go positive and pay tax if you have to at least the rental ends in your pocket .
100% well said
It is pretty hard to have a positively geared property with no renters.
This aged interestingly. Rates did rise to 6.5% and there are far less positively geared properties at the moment
I owned 2 neg gear prop in melbourne and its killing me..what should i do
Sell and invest elsewhere?
The secret of Negetive gearing most of the educator do not know as they want to keeping on spreading education rather to understand the Negative gearing's benefits and factors and financial links and tax llinks with Negetive gearing
Great info
My losses over 12 years has been about 100k, yet CG has been 500k!! seems like i am up even if sold and paid CGT, yep much better if i could make money each year, but very rare in the first 15 years that this happens with houses, certainly in Canberra.
If i was positively geared then I pay more tax BUT my income would be greater so obviously this is the goal but as stated before so hard in the first 15 or so years.
The depreciation is also much more powerful on houses or units built AFTER 1985 ??? i think So newer places are better in that regard.
How often can one find a positively geared property in this day and age? Add to that the rising interest rates, properties getting sold even before they hit the market and at a cost way above the asking, all you are left with is a property that is going to be negatively geared.
Even so, remember someone else is paying a part of your home loan through the rent you receive. This adds to the equity overtime. Wouldn't you rather be in that situation where you could get a small portion of your loss back from tax due to negative gearing + have someone pay a part of your home loan and raise the equity in the meantime rather than be scared to invest at all and watch the value of your cash getting wasted due to inflation?
What if the renter would be paying paying rent? And you can’t move them out legally ( single mother with kids)? It can go on for 4-8 months
Likely if you find a cash flow positive property the capgains will be minimal.
$650k property appreciating @ 7% PA. Even if you lost $400 pw over the long run your still making 20k per year. It's forced savings
Thanks PK 🙏 this advice may sound obvious at first but with so much information pushing investors to buy for negative gearing, especially from the financial industry and brokers who benefit only by selling you a loan, this advice is so good for the people
Yes for sure thanks :)
S
Thanks!
No, but it might turn negative gearing if interest rate raised too much...
True!
You could potentially fix the interest only period to avoid it being negatively geared however this also poses a risk if interest rate drops on the purchase amount.
@@brendanp160 for sure!
Where do such positive geared properties exist? Seem few and far between
You need to buy properties in the sub 480k in places like Pert Adelaide or Regional areas. Thats the only way rent can cover the outgoings.
Hi PK I have one investment in Melbourne which is negative gearing 800 every month and building one more under construction probably will be same negative gearing
I tried to contact you and getting your emails but it asked me pay 6100 something in advance, how would someone could pay before see someone. I am interested to buy property under your guidelines next year after selling one of my Melbourne property.
Sorry could you clarify your question please?
@@AusPropertyMasteryWithPK
What’s your best contact plz like email or mobile as I want to invest next year
@@kalagill4340 it’s on the website consultingbypk.com.au/
i only buy positive geared property's its set and forget ill never negative gear a property
Some people who watched this episode 2 years ago, who bought “positively geared” property at 2% interest rates, now is paying 6-7% and are running on loss…
Yet my clients who I’ve interviewed in the exact same situation received 30% plus rent rise and therefore happy days
Government: give me 10 $ and I give you 3$ back!???? No thanks
Yes
You forgot to take into account the annual appreciation of a house.
That has no relationship whether negative or not
@@AusPropertyMasteryWithPK with the current interest rates, I’d imagine it’s quite difficult to find a property that doesn’t result in negative
@@TheSmokingDev depends on lvr.. at 80 still possible, but harder!
Yes
No
Thanks for sharing
I am NOT a silk worm!
just kidding - thanks for the vid, agree with your principles.
Negative gearing is a negative solution - something you do to claw back cash when you think you have no other better option.
Positive properties are easily provable as a better solution, mathematically, systemically, and dare I say, spiritually.