Call us on 1300 794 893

Your Money

Battling through property

I have recently heard of so-called “battlers” buying lots of houses and I’m wondering how they fund these purchases?

I once came across someone who said he went to Queensland and bought 10 properties on one weekend! When I asked him what he paid, he said $1 million and that they were all positively geared. That means he borrowed the money and the total rent from the properties was greater than his interest repayments. He did this when the real estate market was down, but his homework told him that rents were good. He probably took out landlord insurance, which can give you rent for a time, if your place is without a tenant. It also offers other protection for landlords.

Others buy properties that are negatively geared, where the rent is less than the interest and other landlord costs, so they’re making a ‘loss’ on the deal. However, by using a quantity surveyor or by doing some homework, they find out what ‘on paper’ deductions are available.

These, primarily, are depreciation expenses of many of the fixtures, fittings and inclusions that a landlord has in a rented property. The impact of these deductions can turn a negative cash situation into a positive cash flow via a bigger tax refund.

Things can go wrong – a massive recession, such as the GFC, would bring big unemployment increases – but that could be the only one to really panic about. Though, even in a recession people do have to live somewhere!

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, July 22, 2010

blog comments powered by Disqus
Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300 Pixel_admin_thumb_300x300