Hundreds of thousands of Aussies have bought ‘negatively geared’ investment properties because they were told it was a great way to reduce the amount of tax they pay. While it may sound good in theory, this flawed strategy guarantees that most people will lose $50 – $100 every week for several years… for the privilege of saving some tax!
Having negative cashflow means you have to pay interest and expense shortfalls out of your own pocket. It also limits your ability to borrow more money to buy additional properties. These are major reasons why few investors are able to build a substantial property portfolio. (According to the ATO, 71% of investors own just one property).
In stark contrast, if each of your properties is producing strong positive cashflow, it may be possible to accumulate several properties during your working life to fund a very comfortable retirement.
So what is Cashflow Positive property?
In simple terms, it’s when the income and tax benefits generated by these unique properties exceed the cost of ownership.
With Cashflow Positive properties you receive higher rental yields, plus you still claim tax deductions for expenses such as interest payments, council rates, water charges, repairs, maintenance, building insurance, landlord insurance and management fees.
You can also claim depreciation on fixtures & fittings and the construction cost of the property. If you buy a new property, these valuable depreciation benefits could average over $8,000 every year for the next 40 years!
The properties we source for our investors typically achieve a cash surplus of $100 – $200 per week after all costs including mortgage payments, rates, management fees and insurance.
In reality, Cashflow Positive properties cost nothing to own and generate an after-tax return of thousands of dollars each year for most investors.
Doesn’t that sound more appealing than losing thousands each year?
When we make a property recommendation it’s based on a significant amount of research. There needs to be compelling reasons why tenants would want to live there. That’s why we select properties that are located close to the key amenities and infrastructure that drives population growth, rental demand and capital growth. These areas include major employment hubs, good public transport, schools, hospitals, cafes, shopping centres, plus leisure, entertainment and sports precincts.
NOTE: We do not offer properties in high-risk areas like mining towns, or speculative investments like wraps, land banking or overseas property.
Over the past 28 years we’ve created simple, low-risk investment strategies that average wage earners can use to build a solid asset base and strong passive income stream to provide a financially secure retirement. This is achieved with two unique types of residential property:
- Dual Occupancy Homes – these generate strong Cashflow Positive returns.
- Duplexes – these offer the potential to make up to $130,000 Instant Equity.
Gross rental yields average 6% – 7% p.a. On select homes we can also offer an exclusive 10 YEAR LEASE BACK GUARANTEE starting at 5% p.a.
Consider the superior benefits these homes provide compared to traditional houses, units or townhouses:
- Higher rental yields
- Lower vacancy rates
- Greater tax benefits
- Instant Equity potential
- NO body corporate/strata fees
Plus, Dual-Occs and Duplexes in Queensland cost at least $100,000 – $300,000 less than in Melbourne or Sydney.
Due to the rarity of these properties, they usually sell extremely quickly despite not even being publicly advertised. For this reason, priority will be given to buyers who already have their finance approved (please read “Prepare Yourself for Investment”).
Here’s what the Australian Securities and Investments Commission (ASIC) says about buying a negatively geared property versus one that is positively geared…
“Many investors focus on the tax benefits of negative gearing without considering the loss in after tax income.” “Keep in mind that if you are making a loss your investment is costing you money. You will need another source of income to fund the extra expenses.”
“If you are borrowing to invest, choosing a positively geared investment will increase your income and increase your overall return on investment.”
Read the full article on ASIC’s MoneySmart website: https://www.moneysmart.gov.au/investing/invest-smarter/negative-and-positive-gearing