Many people are down right frustrated when trying to invest in property.
So often you hear people say who do I trust as they get hammered by property sales people and so called property investment gurus promising them instant success if you attend one of their free seminars where all the secrets of making millions through property investment will be revealed.
Unfortunately there is always a catch, these gurus want you to buy from them either one of their over priced properties or an expensive training workshop which teaches you little and takes you no where, always leaving a tantalizing morsel so that you want to know more.
The catch cry from these sales folk and the gurus is that to make money from property investment you have to hold the property for ten years or more in the meantime you will get tax savings that will reduce the amount of tax that you will pay from your wages every week, in Australia they call this negative gearing, simply stated negative gearing is where your investment looses money month in month out and you get some tax relief, the unsophisticated property investor thinks this is a good thing as they save some tax on their income,and may get some capital gain in the distant future.
The sales are slick and extremely convincing people are led to believe through hype and the media that property is the safest investment out there and people are conditioned to believe that you will not loose money investing in real estate.This is further-est from the truth, you can and far to many people have lost large amounts of money investing in all forms of real estate and residential real estate in particular, yet these tragic losses are never published why? Because real estate investment is the sacred cow and so is far to valuable in the money making trough so the facts are hidden individual investors are usually to embarrassed to let any one know that the investment strategy they were convinced to take was horribly wrong.
If you were lucky enough to have held the property for 17 years or more and happened to make a small capital gain, the gain will be taxed, and this is how it works.
Say you bought a property 17 years ago for $175,000.00 and ended being lucky enough to sell it for $440,000.00 the capital gain would be $440,000.00- $175,000.00= $265,000.00 of capital gain fantastic I hear you say....Wait this $265,000.00 is going to be taxed in Australia the tax would be based on half of the capital gain which is $132,500.00 this sum will then be added to your income for that year and you will be taxed at the highest marginal rate which is currently 48% approx in Australia.
All the tax savings that you may have had over that time have been clawed back plus some...
QUESTION: Still think property investment using the negative gearing or for that matter positive gearing strategy is a good way to go?
As you can see that it certainly is not.
Yes I can hear you so what is a good investment? Property is certainly a great investment if you know how to do it correctly and here is the catch slick sales people and the gurus will not tell or show you how as that means they make less money from you and why should they after all if you are happy paying over the odds why confuse the issue.So you are led by the nose as your bank accounts are emptied.You are overjoyed after all you have started on your property investment journey and it was a seamless non worrying affair,yes it should when you stand to loose.Why alert the quarry... You.
Learn and follow the principles of investment and you will become successful.
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