Negative Gearing Extinction: Part 1
Negative gearing is coming to an end. Not today, maybe not in a year. But there is talk of ending it, on a political level. That was politically unthinkable 5 years ago.
Maybe some fringe groups would talk about it, or some political activists. But now we have one of the major political parties of Australia openly speaking out against negative gearing. The Labor government has released an attack on negative gearing as part of their policies.
You can read more about that here.
If you didn’t read it, simply put, it does not look good. And, if you are someone who prides themselves on foresight then you know, as well as I do that if negative gearing isn’t ‘changed’ or ‘reformed’ now, then it will be in the future.
So it is time to get off planet “Negative Gearing” and look for a safer place, where a meteor isn’t going to hit. Which is why we need to take this negative gearing idea and turn it completely on its head - with positively geared property.
There are a few ways you can get involved in positively geared property. The first way is to just buy properties at great prices. This is where a buyers agent can help you. Sometimes a great price is just not enough however.
The other option is to pay down your loan enough so that the property starts turning into positively geared territory. In many situations that can stunt growth and reduce your ability to access equity for the next purchase, since now you have a large “cordoned off” amount of equity which cannot be used for future development or purchase.
One of the best ways we have found is to build a granny flat on your property. You can have a look at one of our use cases here.
Granny flats are not only great because of the yield they create or the extra capital they bring to the property value, but because most of the money you spend on the project - goes towards the project. There is minimal approval costs, registration fees, subdivision costs ect.
This means that as a cash-on-cash investment, granny flats typically have yields from 10-14% per annum. This is well positively geared on their own, and if you can pair that sort of return with one of your negatively or neutrally geared assets… the results really speak for themselves.