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Making money through negative gearing

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Your Investment Property | 21 Dec 2011, 12:00 AM Agree 0
Q: I’m looking at financing options for property investing. My income is $80k (pa) and I’m looking to purchase around the $500,000-600,000 mark. I’m told cash flow positive properties are less risky, but would it make more financial sense to negatively gear my investment? How can I make money if it is negatively geared?
  • Kevin from ActiveInvesting | 17 Mar 2013, 05:47 PM Agree 0
    Each investor really needs to take the time to learn and understand the benefits and pitfalls of both positive gearing/cashflow positive and negative gearing.
  • jason | 28 Dec 2013, 09:28 AM Agree 0
    Good article however property isnt just "one or the other" so to say. Technically, any property can be positive geared. Just depends on how much deposit goes in. Also, positive cashflow properties can definatly make capital growth. I recently purchased a property that I set up on an on an interest only loan fixed for one year. If the property is a short term investment ALWAYS do interest only! I made around 5k cashflow in the year and sold for a 50k profit. My outlay was only a 10 percent deposit which set me back about 15k. So, cash on cash return, this investment provided me with over 200 percent profit in one year. Now ive reinvested that money into 3 properties and intend to sell these after one year and continue building the portfolio with the increases in capital. The first thing anyone should do is determine why exactly they want property, the second is to realize deals are MADE. There is no set way. Work out if a property can make a profit and make an offer based on your figures, not what people say you should offer.
  • jason | 28 Dec 2013, 09:33 AM Agree 0
    Basically, you can have both positive cashflow and a capital growth IF thats what you look for to begin with. Also, capital growth can be forced by renovations and if the property is brought under value to begin with it provides instant capital.
  • jason | 28 Dec 2013, 10:09 AM Agree 0
    One other thing, if your looking to replace your income, all your properties should be cashflow positive. $50 on one property isnt much, but $50 across 10 starts to show promise. Not to mention if each was sold for a 20k profit. The beauty about positive cashflow is the only money required from you will be a deposit. Banks will limit your borrowing if you have multiple negative geared properties eg, if your out of pocket $100 per property each week, you will reach a point where you literally cannot afford any more. Positive gearing does not have that problem.
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