There are plenty of reasons why Australians love to borrow money to invest in bricks and mortar. Some people think the value of property never goes down, others like the fact you can see and touch it. But, mostly, it is the ability to offset the cost of owning the property – including the interest paid on a loan – against assessable income that makes it particularly attractive. But it may not necessary be the best investment strategy for everyone.
If the loan costs are greater than the rental income, then the Australian Taxation Office allows investors to offset the loss against their income, this is often considered more a “tax strategy” than an investment one. Since the aim of most investment strategies is to make a profit, investors with negatively geared property either hope that one day the rent covers the loan costs or the capital growth in the property is such that they make a profit when it comes time to sell. As soon as the rent covers the cost of borrowing, it becomes a positively geared property and the income might be subject to tax. I would say it is better to pay tax on a profit than to have made a loss. For most of the 30 or so years negative gearing has been around, it has been a reasonable strategy based on the capital growth rates of property across the country. However, at a time of global economic uncertainty, betting on capital gains from property is a risky and outdated strategy for most people. I would rather see people purchase cash flow positive property that can then be rented for more than the weekly outlay. If it generates a capital gain, then that is a bonus. If you invest for income, and the income is paying for the property, that is savvy investing. Any accountant, would warn against investing in property, simply for the purpose of a tax deduction. If a property market is stagnant, like some areas have experienced in Australia, then you will be falling behind.
I think too much emphasis is placed on the tax advantages of negatively geared property and not enough on creating positive cash flow and real equity in the property. It is possible to buy property that can be reasonably expected to increase in value and bring in sufficient rent, coupled with depreciation, to cover costs plus more.
The Dual Dwelling is a revolutionary product that fundamentally changes the viability of investing in residential property. When viewed from the road it appears to be a high-quality standard residential dwelling, but in fact it is actually two separate residences. Each home has its own entrance, garage, fenced back yard and a fire rated dividing wall that separates the two homes and extra soundproofing ensures the occupants privacy. The Dual dwelling layout provides the investor with two rents instead of one, which means that the property can be cash flow positive from day one and could return $100 – $200 per week after all costs including mortgage payments, management fees, insurance, one set of rates and no body corporate fees. There are over 100 homes available right now, situated in growth corridors in South East Queensland. These homes also come with a Peace of Mind 3 year property rental return guarantee. A better way to invest to create true wealth for your future.
For more information on how to create “real wealth” using positive cash flow property contact Dual Income Properties on Phone: 1300171000