6 The truth about property investing Flashcards
(41 cards)
What percentage of property investors own one rental property?
76 per cent
According to an ABS survey of property investors.
What percentage of property investors own two rental properties?
16 per cent
Based on findings from an ABS survey.
What percentage of property investors own three or more rental properties?
8 per cent
Results from an ABS survey indicate this figure.
What are the three main reasons people invest in property?
- To save (income) tax
- To make money
- Out of a love of landlording
What is negative gearing?
A property investing strategy that allows investors to access an immediate tax deduction while potentially building wealth via long-term capital appreciation.
How can negative gearing reduce income tax?
If property expenses exceed income, the loss offsets other taxable income, reducing overall income tax paid.
What are the three types of real estate profit?
- Capital gains
- Lump-sum cash profits
- Recurring positive cashflow returns
True or False: Most landlords genuinely enjoy being landlords.
False
Most landlords feel they are helping tenants rather than enjoying the role.
What is the first step in the negative gearing model?
Equity and lifestyle
Involves earning money from your job after deducting living expenses, taxes, and superannuation.
What does acquiring a negatively geared property typically involve?
Ongoing cash outflow due to property expenses being higher than income.
What are the two ways to profit from a negatively geared property?
- Property value increases beyond after-tax loss plus inflation
- Cashflow increases or expenses decrease to achieve positive gearing
What is the positive gearing model?
A property investment strategy where properties generate a positive cashflow rather than a loss.
What is the key difference between cash properties and cashflow properties?
- Cash properties: Acquired for lump-sum gains
- Cashflow properties: Provide ongoing positive cashflow returns
What does the first third of cashflow surplus get allocated to?
- Reinvesting back into the property
- Paying off debt
- Providing incentives for tenants
What is a strategy for increasing tenant satisfaction?
Providing incentives such as nursery vouchers or minor property improvements.
What is the second third of positive cashflow used for?
- Replacing salary
- Reinvesting to grow the empire
What is the final third of positive cashflow allocated to?
Purchasing assets designed to earn capital gains.
What is pyramiding your profits?
Using net positive cashflow to acquire additional cash and cashflow properties.
What is the passive income needed to work one less day per week if earning $50,000 annually?
$192 per week
This is calculated to maintain lifestyle without financial loss.
What are the two popular classes of assets for capital growth?
- Shares
- Real estate
What is meant by ‘pyramiding your profits’?
Allocating a third of your net positive cashflow to savings/equity to acquire other cash and cashflow property
This approach creates a new positive cashflow model and compounds returns.
What are the two most popular classes of assets for capital growth?
- Shares
- Property
How can shares generate returns in the stock market?
By going long in a rising market or going short in a declining market.
What is the purpose of allocating a third of positive cashflow to growth-focused assets?
To earn capital gains rather than cash or cashflow returns.
