atlantatoaus

Hi

I was jsut reading a article on australian real estate and came across this word negative gearing .Does any body know what it is?
regards
priya

ABCDiamond

Negative gearing occurs when you borrow to invest in an income producing asset and the cost of borrowing exceeds the returns (income) from that asset.

Negative gearing on a rental property, for instance, occurs when the annual interest payable on the loan used to acquire the property, plus other expenses incurred in maintaining the property, exceeds the annual rental income the property generates.

The reason negative gearing can be attractive is that under current Australian Taxation law, an investor may be able to claim a deduction for the loss, which can be offset against other taxable income, such as salaries, business income or other investment income. (Provided it is an Australian income producing investment.) Of course, if there is no growth in the value of the asset, you could lose money even after the tax benefit is taken into account.


Also look at : http://www.propertyinvesting.com/str...vegearing.html

Wol

My understanding is that it means that someone has a mortgage on a house greater than the house is worth on the market. Ie, if they sell they will end up with no house but still some debt.

It is a word that IMO will be used quite a bit in Oz over the next year or two!

Australians have got used to a housing market which *always* goes up and, great gamblers that they are, keep piling in more money because they *know* they will make money on resale.

The only people who will reliably make money are the agents. A lot of folk who piled in these last few years are going to find life difficult.

ABCDiamond

Hi Rog,
That's "Negative Equity"

A number of people who were buying with 106% mortgages were in that position from day one.

NedKelly

Rog, I think you are talking about negative equity.

Wol

Yep! RTFQ!

JackTheLad

reverse?

Simone

Oh wow, I knew what is was!

A few weeks ago, I didn't know about this, I didn't know how much income tax we were paying, and more about that, and that you don't pay tax over the interest of investment properties, I didn't even know what interest really was, and how high it is at the mo, and all the stuff regarding different types of mortgages!
I didn't even know how much we were spending, and earning....(but we were saving)

But now, after a chat with my bosses, reading a book called 'Making money made simple'(it's NOT a get rich quick kinda book), by Noel Whittaker(the book came out in 87 and was in the top 10 for 9 years..... and revised edition is from 03), and reading other info, I'm much more informed! Still working on it though!
We were doing things right though, the obvious stuff like spending within our means, saving, not borrowing money for things that don't increase with value. I hate borrowing, but am learning now that borrowing for a house isn't of course a bad thing(and it's necessary anyway )

Anyway, just wanted to share that. I'm proud of myself! I'll now be confident when getting a mortgage and buying a house.


Oh, and for other totally clueless (young) people, I thoroughly recommend that book, and he also has others that go deeper, and also ones about superannuation etc. Yes, I also now get superannuation, but I know that our first goal is to pay of our own house(when we buy it..) as soon as possible...(I'm aiming for 15 years, but it depends on how much we are earning, and when we have kids...)

right, enough blabbing, sorry!!

Phoenixuk2oz

In business speak, gearing is a reflection of the mix of "debt" to "equity".

The higher the proportion borrowed, the higher the gearing and the lower the proportion borrowed, the lower the gearing.

As for Negative gearing in real estate speak, take a look at this http://www.propertyinvesting.com/str...vegearing.html

Hope it helps

Quinkana

Investing in reverse?

Phoenixuk2oz

Me finx that's wot JTL said in an earlier post

JackTheLad

It was funny the first time