The Australian Labor Party's negative gearing changes have opened up many industry discussions, even provoking discouraging reactions from market players.
Many experts disagreed with the plan, saying it could lead to a recession. Surveys have also shown that Australians were convinced that this change would result in a significant decline in housing prices.
In this spirit, should investors urgently seek positive leverage?
In an interview with Your Investment Property, Rich Harvey, Buyer Agent and CEO of Propertybuyer, discussed the possible effects of the proposed changes. He also gave advice on how to have positive orientation investments.
YIP: Given the possible changes in the negative gear, should investors aim to adopt positive behavior as soon as possible?
Rich Harvey: Investors should aim to see a negative cash flow investment property become neutral or positive at some point in the not-too-distant future.
Negative conversion is a strategy that makes sense only if the property you buy will generate a much higher capital growth result – [outweighing] the insufficient cash flow received while retaining ownership over time time.
If you have a higher salary, you can usually afford to hold more negative properties for longer. Even people with modest incomes can still use the negative gears effectively because they can use their [taxes] to compensate for negative gear losses.
However, it is important not to choose an investment strategy solely on the basis of a tax position. Note that if the Labor Party wins the next election, the policy of removing the negative gears is only proposed for the established property and it will take time for this law to be passed by both Houses of Parliament and then promulgated (the most likely date of implementation is: July 1, 2020). And the policy will not be retrospective – if you already have a property with a negative orientation, you can continue to use this strategy.
YIP: What are the potential positive and negative impacts of this movement?
RH: This decision will encourage investors to think very carefully about the cash position of any future investment. This will discourage investors from choosing established properties and encourage them to consider new properties. However, this is problematic for a number of reasons. These "new properties" are generally located in suburban areas or areas where the potential for capital growth is low.
Areas that require more rental properties are in high-demand suburbs, built-up areas near jobs, and well-established neighborhoods. We are forecasting a significant increase in rents due to the decline in the supply of investment properties.
YIP: What should investors do to aim for a positive gear?
RH: As an investor looking for a positive gear should:
Create a global strategy to buy multiple properties. A property will not make you rich and will not reach your retirement goals!
Ask professional and independent advice from a buyer's lawyer to know where and what to buy.
Buy in areas of high rental demand, where demand is constant and vacancy rates are low – that is, high employment opportunities.
Consider getting a higher return on the property by using a number of smart strategies – adding value through renovation, adding an independent apartment, creating a duplex, renting fully furnished.
Review your rents at least once a year and look for increases with your Real Estate Administrator.
Take good care of your tenants and give them a gift to properly maintain your property.
Make sure you ask for all tax deductions available and keep meticulous records.
Whether you're looking to buy your first home, move, refinance or invest in a property, a mortgage broker can help. Get loans from all major lenders, get help with paperwork – and this service is free. Get help from a local mortgage broker
Top suburbs:
Bendigo
,
sth toowoomba
,
Nightcliff
,
new farm
,
Redcliffe
Get help for your real estate investment
Do you need help in finding the right loan for your investment?
When you invest in real estate, it's important to make sure that you do not just have the lowest available rate that you can get, but you also have the features of ready adapted to your needs.
Just fill in a few details below and we will then do what is necessary for an Australian mortgage broker to contact you and establish a solution. What features or types of loans are suitable for your needs? We will even help with the paperwork. In addition, an appointment is free.
We value your privacy and treat all your information seriously – you can check
our privacy policy here
