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Negative Gearing Advisor in Victoria

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Negative Gearing And Property Advisor in Victoria

Negative gearing is when you borrow money to buy an investment, and the expenses, such as loan interest and maintenance costs, are higher than the income you earn from it. While commonly linked to rental properties, negative gearing can also apply to other income-generating investments like shares and managed funds. For property investors, negative gearing means that the cost of maintaining a rental property is greater than the rental income received. While this can help reduce taxable income, it is essential to understand both the risks and benefits before making an investment decision.

Karlic & Co: Negative Gearing Advisor in Victoria

Buying an investment property can be a great way to build wealth, especially in Australia, where real estate has historically shown strong growth. A Negative Gearing Advisor in Victoria plays a vital role in helping investors navigate the complexities of borrowing to invest in property. Negative Gearing & Property go hand in hand because borrowing to invest allows people to purchase properties they might not otherwise be able to. If the property’s value increases over time, the profit from selling can make up for the initial losses. For many investors, the main attraction of negative gearing is that losses from the investment can be offset against other taxable income. The tax benefit you receive depends on your income bracket, which is why getting tax advice from a professional is essential before proceeding. A Negative Gearing Advisor in Victoria can help you understand these financial implications and ensure that you make informed decisions.

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Things to Consider For Negative Gearing

Although negative gearing can be beneficial, it carries risks. Here are some key points to keep in mind:

  • Profits depend on capital growth: The goal is to sell the property at a higher price than what you spent. However, property values can fluctuate, and there’s no guarantee of appreciation.
  • Managing cash flow: Since rental income won’t cover all expenses, investors need to fund the shortfall from other sources.
  • Depreciation and tax impact: Some costs, like property depreciation, can be claimed as tax deductions. However, they also reduce the property’s cost base, which could lead to higher capital gains tax when selling.
  • Investment strategy: Unlike a family home, an investment property should be purchased with financial logic, not emotions. A Negative Gearing Advisor in Victoria can help ensure that your investment aligns with long-term financial goals.

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How a Negative Gearing Advisor in Victoria Can Help

To get the most out of negative gearing, you need the right tax advice and financial guidance, along with the best property and loan. It is always a good idea to speak to an expert to make sure the investment fits your budget and will benefit you financially in the long run.

We can help you in many ways when buying an investment property:

  • We offer a detailed negative gearing & property guide, explaining what expenses you can claim, how capital gains tax works, and the tax benefits of negative gearing.
  • We use a smart software tool to prepare a 10-year cash flow analysis, predict your taxable income, and estimate future equity growth.
  • We help you find the right property in a good location through our buyer’s advocate services.
  • Our mortgage broking partners assist in finding the best loan that involves maximum tax benefits.
  • Since a negatively geared property can affect your cash flow, we help you apply for a PAYG variation so your take-home pay reflects tax savings throughout the year.

A Negative Gearing Advisor in Victoria ensures that your investment strategy aligns with market conditions and long-term wealth-building goals.

The Risks

While borrowing money to invest (gearing) can increase your profits, it can also increase your losses. For example, during the 2008 U.S. housing crisis, around 30% of people ended up owing more on their home loans than their houses were worth. If you are thinking about using negative gearing (where your property costs more to own than it earns), here are some important things to keep in mind:

  • Property advisors usually works best over the long term and needs careful planning. Be extra careful if your property is expected to lose money (negative cash flow) for several years.
  • Property profits mostly come from rising value (capital gains). But there’s no guarantee your property’s value will increase enough to make up for your losses.
  • Buying an investment property is different from buying a family home. A family home is an emotional decision, while an investment should be a smart, logical choice. You’ve probably heard the saying “location, location, location”—this matters even more when buying for investment.
  • Negative gearing isn’t right for everyone, and tax benefits alone shouldn’t be the main reason to buy a property. While it might help reduce your taxes, that depends on your situation and the kind of investment you choose.

Negative gearing means your property will cost you more money than it makes, and you’ll need to cover those extra costs from other income sources.

Case Study

Let us say you buy a unit in your name for $500,000 and take a loan of $450,000 at a 7.5% interest rate. The property earns a weekly rent of $550 or $28,600 yearly. Here is a simple breakdown of costs and income:
Income:

  • Rental Income (52 weeks @ $550) → $28,600

Expenses:

  • Interest on Loan ($450,000 @ 7.5%) → $33,750
  • Water Rates → $1,200
  • Council Rates → $1,600
  • Insurance → $1,100
  • Repairs & Maintenance → $800
  • Agent Fees (7% of Rental Income) → $2,002
  • Bank Charges → $15

Net Loss:

  • Total Expenses → $40,467
  • Net Loss (Income – Expenses) → $28,600 – $40,467 = -$11,867

Here, we can see that if you purchase a unit for $500,000 in your name and take a loan of $450,000 at a 7.5% interest rate, your annual rental income would be $28,600, based on a weekly rent of $550. However, the expenses associated with maintaining the property add up significantly. The interest on the loan alone amounts to $33,750 per year. Additional costs include water rates of $1,200, council rates of $1,600, insurance of $1,100, repairs and maintenance at $800, agent fees of $2,002 (7% of rental income), and bank charges of $15. Altogether, the total expenses for the year reached $40,467, resulting in a net loss of $11,867.

A Negative Gearing Advisor in Victoria can help property investors evaluate whether negative gearing aligns with their financial goals and how to optimise tax benefits.

Karlic and CO. is a Negative Gearing Advisor in Victoria that ensures smooth tax filing and compliance with investment regulations. We make property management simple, help you file taxes easily, and ensure you have the capital gains tax records you need when selling your property. We are something more than just tax accountants. We help you reduce taxes and build wealth using smart strategies like Negative Gearing & Property investments.

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