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A positively geared property means that the rent received from your investment property is greater then the costs of owing it, including interest rate repayments and maintenance expenses. However, property experts note that positive gearing could be tricky because it relies on the rents being high in comparison to the purchase price of the property.
Cheap properties paying high rents tend to be thin
on the ground. Payment of a large deposit on the property is usually required to
push it into the positive zone.
To generate a positive cash flow, investment costs must be lower or equivalent to the income received from the property, taking into account your rental yields combined with tax breaks. If construction of an investment property commenced after 19 July 1985 you are entitled to depreciation allowances that will enable you to claim “paper losses” to reduce your taxable income.
The benefit of a property that generates a cash flow is realized when you sell the investment property some time in the future. This is because you won’t have to subtract the losses incurred over the life of the investment, as is the case with negatively geared properties. For detailed information on this issue you should seek the advice of a financial planer with expertise in investment property or a qualified accountant.
In the final analysis, property experts point out that prospective investors should always apply the fundamental rule of buying the right property in the right location at the right price. With capital growth as the ultimate goal these three elements are vital. Apartments for sale Melbourne - property investment opportunity.
Why do some property investments work better than others for their owners .... and what can I do to make sure my property investments do perform?
Essentially, property investment performance means minimizing your 'out of pocket' expenses and maximizing your potential capital growth. Some of the reasons property investments fail to perform as expected can include:
the loan taken out was structured wrongly;
the loan was taken out in the wrong name;
"high maintenance" houses were purchased;
investors missed out on claiming the highest possible amount in non-cash tax deductions;
low rents and high vacancy periods;
paying too much for the property in the first place;
low capital growth potential.
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