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Wealth Creation through Property Investment

Wealth Creation through Property Investment

Wealth creation through property investment and negative gearing is least understood by many investors. It is often regarded as the property investor’s best friend but when executed incorrectly can create a lot of financial headache.

Negative Gearing

Negative gearing is a strategy where an investor buys a property in such a manner that the property costs are higher than the property income. That is, the yearly interest payable on the loan you have taken out to purchase the property and other related expenses involved in property maintenance exceeds the rental income generated by the property each year. With this, you experience a loss of cash but the tax system absorbs the effects of this loss, and ultimately the tax effects reduce your loss. So basically, your rental income and the tax man pay for your investment property!

Tax Benefits of Negative Gearing

The Australian Taxation Office (ATO) allows investors to offset losses incurred from higher property costs to property income against the income from any other source. This might seem very kind of the ATO but you must consider several other factors before thinking of utilising this strategy. When using negative gearing you must always try to balance your repayments. If you fail to plan this aspect effectively, you may end up losing much more than you initially intended.

Earn and Save Taxes at Once?

While many might try to sell you a negatively geared property based on the above statement, you must always remember that it is not possible to make money and save taxes at the same time. The losses incurred in a negative gearing strategy are real and you will need to physically overcome your tax or chash-flow shortfalls. You may have unrealised capital gains that are not taxable as long as you don’t sell the property. But the problem with an unrealised profit is that you cannot use it easily. Accessing your unrealised profit can be a painful and expensive task.

Negative gearing is an excellent wealth creation strategy but it is designed in a way to incur losses. This means you need to continue to work in order to balance the losses. The strategy does not provide enough financial freedom unless you have high income from other sources and get high capital growth. It definitely helps you gain wealth but if you are the sort of person who seeks an early retirement, it is not an ideal strategy for you.

By partnering with Malyshka you will be able to buy property at near developer cost, have cash flow positive property, instant equity and in areas with potential high capital growth

2 Comments

  1. How would you find properties that will give me a passive income to replace my income in order to retire in the next 5-7 yrs

    • Hi there

      Thank you for your comment and query via the website blogs.

      Malyshka’s primary model is wealth creation via property development.

      By developing you acquire property at cost.
      I am sure you understand that when you buy a can of coke at your local corner shop you are paying retail price.

      The local corner shop pays the wholesale price for the same can of coke and then sells it to you at retail – clearly the wholesale price is much lower than the retail price and that’s how the corner store makes a profit.

      Malyshka is offering you the exact same profit opportunity via property. While the average investor buys property at retail price, suffering years and years of negative gearing pain watching cash flow out the door, the savvy investor buys at wholesale price – if not cost price – and has a positive cash flow.

      As an investor, having little to no cash flow means you can’t move forward so your portfolio becomes very stagnant. Obviously one of the reasons you think of investing is to acquire extra cash flow in your life. A positive cash flow property puts money in the investor’s pocket before tax

      At Malyshka we frequently get asked “is it possible to buy property at cost or near to it and cash flow positive?” The answer is ABSOLUTELY! Our clients and partners are doing it right now!

      Malyshka has projects running all the time that does just this.

      Our current ALDERLEY STREET project has an return on equity of approx. 60% – that is $120k upfront and $75k in manufactured equity or a total of $195k in equity in a dwelling worth $422.5K today. It is also positive cash flow of approx. $7,500pa – before depreciation!! Imagine buying 2 dwellings keeping 1 and selling one. Income of over $7.5K plus equity of $195k, and the ability to possibly buy 2 in the next project and do the same thing again and again.

      Astute investors know that you have to build your equity in upfront by acquiring properties at cost price – not by paying retail! These properties tend to be cash flow positive meaning you may be able to retire on a passive income!

      To do this you need to be involved in property development. Don’t buy the coke at retail, buy it at cost and sell it at retail!

      Contact Malyshka today and let us show you how you can have a coke and a smile and retire on a passive income!

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