| |
| |
|
Real Estate Information |
|
|
Negative Gearing - It's Not to Your Benefit!
The concept of negative gearing has been originally developed to encourage real estate investment in Australia by allowing any income losses from property investment to be deductible from other income as a tax benefit. This means that the taxable income of the owner will be reduced after the deduction and therefore the total tax payable is also reduced. In view of the fact that many of the profits from property investments are usually obtained as a capital gains at the time when the property is sold, but do not generate positive cash flow from rentals during the course of the holding period, negative gearing therefore came in to address this issue. You lose either way However, the flaw with negative gearing lies in its concept as well. If an investment generates a positive cash flow, the increased income will make the investor liable to pay more taxes as well. In the end, the investor loses either way. If he makes money from positive cash flow, he has to pay part of it off in taxes, while negative cash flow will take money out of his pocket. Therefore, with a negative geared property, it is not possible to get a positive cash flow and pay less tax at the same time. No guarantees on property value appreciation Investors who are encouraged to put their money into negative geared property should think twice. As these properties are expected to generate profits only through capital gains, the value in capital gains should then be greater than the total losses incurred over the course of the holding period. However, there is no guarantee that the value of the property will appreciate, or at least appreciate enough to cover your losses. Also, you can't possibly use your expected future profits now as it is not been realized yet. Beware of attractive property packages Who gains from this then? Well, investors who are seeking investment property will tend to seek out property developers or sales agents. In order to make a property seem attractive, they are packaged with elaborate financial models with expected returns on investment. However, commissions and profits to the developers have all been packaged into the sale price. With this, investors end up paying premium price for a property with negative cash flow, which is used to pay for hefty commissions to sales agents and developers. The disadvantage of property depreciations Another aspect that should be watched out for would be property depreciation for taxation purposes. While it is true that depreciation is applied and is used for tax deductions, however, accumulative tax deductions for depreciation costs on property with appreciating value may cause capital gains taxes to be large. This is because the greater depreciation you apply onto the value of your property, the lower its value will be on paper. Therefore, your difference between the sale price and the book value of your property at the time of sale will be great. This leads to larger taxes imposed onto you. Do not purchase because of tax benefits Finally, making a property investment requires careful planning and consideration. Extra caution must be put in especially when a property is projected to generate a negative cash flow. In the end, tax benefits should not the main reason for property purchase. You may end up losing a great deal of money in the end. For more information, please visit Mortgage Mall Australia. Naomi Warne of Around the Corner Real Estate Dealers, Sydney, has helped her clients with profitable property investments and numerous tax benefits. Having started as a real estate agent, Naomi has established herself as an analyst and property consultant.
MORE RESOURCES:
Google News |
|
|
|
RELATED ARTICLES
Prepare Your Rental Property for Occupancy Among your many responsibilities as a landlord, the law provides for a warranty of implied habitability. This means that the dwelling must be considered habitable and any known problems must be fixed before you allow a tenant to take occupancy. Houses For Sale By Owner - Negotiating Tips Houses for sale by owner, also known as "FSBOs," are a unique case in real estate investment. Buying from an uninformed seller who thought he knew enough to handle everything by himself can be frustrating. Real Estate Investing In Bulgaria As Bulgaria readies for joining the European Economic Community in 2007, many investors are looking to see if there are real estate bargains to be had there.Other countries have had a big run up before and shortly after joining the European Economic Community. Safe, Scenic & Secure Sussex County Delaware As I write this, there is a considerable concern about the dangers of urban life, triggered by the terrorist attacks on the USA. As some of you know, I have been a student of disaster preparations and a real estate consultant for those seeking "secluded and survival properties" for over thirty years. San Antonio Texas Real Estate The San Antonio, Texas real estate market is still going strong even after several years of growth.San Antonio ranks as one of the most affordable cities in the nation to purchase a new home. Real Estate Investment Requires A Team I had a hard time at first with real estate investment. One of the reasons was that I tended to be a "lone wolf," trying to do too much myself. Real Estate Investing - Basis Explained Our complex IRS code requires that your, as a real estate investor,accurately calculate your "basis" in investment property when reportinga gain or loss on a tax return.Your monetary gain or loss when you sell investment property is determined by comparing the sale price to the adjusted basis in the property. Buying A Home - What Is That Noise!?! You've found the perfect home, closed escrow and just finished moving in. As you happily fall asleep, all seems well in the world. How to Build a Real Estate Investing Power Team As you continue to read about real estate investing, you will no doubt come across the term 'power team'. What is this 'power team'? A power team is a group of people without whom successful real estate investing becomes very difficult, if not impossible. 5 Rock-Solid Real Estate Investment Strategies Investing in real estate is more complex than simply buying and selling homes. To help new real estate investors to decide which strategy might work for them I put together 5 rock-solid strategies. Financing Houses What Real Estate Lenders Look ForLenders control many programs -- some make use of over 200! Generally, lenders look for the following typical standards, with many exceptions:1. Absolutely no late mortgage payments2. Theres More To Making Money Than A Tertiary Education An education of some sort is a prerequisite these days if you want to start a secure career in whatever field you choose. However, have you thought about where this will get you exactly? Will it help you achieve all your dreams in life, both financial, physical, emotional etc?This article is focusing on the financial and lifestyle dreams that you may have. The UK has Gone Property TV Show Crazy! The UK has gone property TV crazy. There are now shows about developing, buying, doing up and selling your home on every channel nearly every day. How to Get Financing after Filing Bankruptcy If you're thinking about buying a home but have declared bankruptcy in the past, don't give up hope. There are still ways for you to be able to find a loan, even if your credit history is less than sterling. Investing In Real Estate Investors With the never-ending changes in our Real Estate Markets real estate professionals are starting to pay attention to the sound of new commission streams of income. Some realtors have either shied away or ran-away from such terms as "Cap Rate," & "Cash-on-Cash Returns. Getting Raw Land, Not a Raw Deal! There is more to buying raw land than meets the eye and more than a few individuals have wished they'd had a second chance upon finding themselves duped, conned, misled, ill-advised, uninformed, oversold, undereducated and often unprepared. They realize, often too late, that a raw land purchase should be properly investigated, evaluated and negotiated using a logical and rational plan. First Impressions Will Sell Property Fast! First impressions count, buyers will have already formed an impression before they step into your property. A well-kept garden, pathway and fence, plus a freshly painted front door are immediately appealing, whereas a scruffy outdoor space with a litter bin outside the front door may turn many prospective buyers away. Home Appraisal Values Are Critical To most, owning a home is a necessity, but sometimes it is a matter of pride or a business investment. Home appraisal values become relevant if one wishes to sell his house. How To Increase Your Homes Selling Price by $3,306.75 In The Next 33 Days According to the Federal Housing Finance Board:.. Home Buying: Things To Keep In Mind So you've decided you want to own a home and now you want to begin your search for one. Before jumping into a home search, there are a few things you should keep in mind when going about buying a home.
|
| home | site map |
| © 2006 TIGER MEDIA |
