Buying in Australia

[Keith and Linda]

Why would they fear to tread? After all, they're backed up by the man upstairs, aren't they? And why would they tread at all? They've got wings.

 

You may be trying a wind-up here, but just in case your not then please look up the meaning of the phrase.

 

some people may argue the assumption that it's a man upstairs

[Gbye grey sky]

I get very uncomfortable with those conversations. The last thing you want to do is to upset your friend by pointing out they're talking a crock. Usually, when you dig into the numbers you can see that they haven't really thought it through.

 

Buying a house as a deliberately loss-making investment just to reduce your tax liability just doesn't make sense.

 

Hallelulah! An Aussie friend of mine tried to explain the 'benefits' to me of negative gearing years ago and was really irritated that I just did not get it. IMO negative gearing should be seen as a hedge and damage limitation should you pick a poor investment. Those who advocate it as a positive outcome are being misled I feel. In the UK I believe you can only carry forward the loss imperpetuity against future rental profits (unless you are in business as a property landlord) which I feel is a sounder approach.

[northshorepom]

Hallelulah! An Aussie friend of mine tried to explain the 'benefits' to me of negative gearing years ago and was really irritated that I just did not get it. IMO negative gearing should be seen as a hedge and damage limitation should you pick a poor investment. Those who advocate it as a positive outcome are being misled I feel. In the UK I believe you can only carry forward the loss imperpetuity against future rental profits (unless you are in business as a property landlord) which I feel is a sounder approach.

 

There are still plenty of people at it, though

 

It only works as a "sound investment" in an environment where capital gains are so high you can wear the operating loss. Unfortunately so many people in Aus have their finger in the investment pie as a result of this (and other) stupid tax breaks that federal and state governments cannot follow any policy path that has the potential to risk those strong capital gains or risk sharp recession and electoral suicide, which is madness. It's either a Ponzi scheme or govt underwriting the risk for people who don't really need the handout, depending on how harshly you want to view it. One thing it can't be viewed as is sound policy, as it is a stimulus to one of the areas of the economy that is clearly least in need of it. Typically the only people who defend it are property investors, funny that. Unfortunately there are so many of them that government is too chicken to try and deal with it

 

Whole thing needs phasing out with a possible concession for new developments only, which was the point of it in the first place (ie an incentive to get spare capital into increasing the housing supply, not a tax giveaway for the middle classes)

[VERYSTORMY]

We just bought our block from a guy who has invested a lot in property. He had paid $450k for it and sold it to use for nearly half that because he has suddenly found he cant work due to a serious illness. He is a pretty wealthy and switched on bloke - big house in Peppermint Grove. But, he created a company to own all the blocks (there are dozens). Unfortunatly for him, he included his own house in the company for tax advantages. But that meant lose one, lose all. So, now he is desperate to get rid and has been selling for what ever the bank will let him sell for otherwise he loses not just all the lots but his own house. He is going to make a massive loss anyway.

 

In some ways we feel bad for him, but, that is the gamble you take. He was already in big trouble after buying everything at the peak of the mandurah property bubble which then burst.

[gpo1971]

Buying an investment property is old news.

What you want to do is find an older place on a big block, knock it down and duplex it. Much better returns.

Not that I'd know, I don't do this sort of thing, just know a couple of (loaded) people who do.

[rammygirl]

All sounds great in theory but I had a friend who I went to uni with, did really well in the UK, emigrated and paid cash for his house, went out buying investment properties, land, deals, joined an investment club and had a notion that he would retire at 50. Looked like he was going to make it for a while. Used to brag about how little tax he was paying.

His degree is in economics and he works on the principal of cash flow. Doesn't matter what you owe as long as you can meet the repayments. Along came the GFC, he lost his well paid job and company car at the same time, lots of outgoings, nothing coming in. Tried to sell off a few properties fast, lots of other people trying to do the same thing, prices were down, he was paying land tax on some land he had bought and couldn't get development approval for.

 

Ended up nearly losing his own house and now has a massive mortgage on his home and a couple of rentals he couldn't get rid of.

 

He nearly talked my wife into we should be doing the same thing but I said it was too risky and I would be glad just to pay our mortgage off. He thought I was a fool but a few years down the track and we're better off than they are by a long shot.

 

It can and does go wrong.

 

yup up that is the sort of economics that got is into the current mess!

 

like my FIL (a Yorkshire man) said "all these people with big houses flash cars etc. often own nothing. Wait till the tide goes out, then you can see who is still wearing pants!"

 

it it does all sound great but cash is king if you have it. Cash flow can easily come unstuck.

[Taffyowen]

Ive invested from a distance before and never had issues, however I appreciate all the comments and understand the risks involved. Ive also got some friends in te area we like in Queensland that could keep an eye on things. The property in Queensland would also be somewhere to potentially move to long term therefore it would be a financial and personal investment potentially too.