What to do with negatively geared properties? - Posted by Allan

Posted by bedros on March 09, 2003 at 18:57:16:

Im no exp landlord but i would try to sell it if you can. that is if you can sell it quick and its a desireable property and easy to sell. you will walk away with profit, then just buy something that does cash flow or a few small ones (even better) that will take more maintenance and will both appreciate and cash flow. The key is to get them that cash flow and appreciate.


What to do with negatively geared properties? - Posted by Allan

Posted by Allan on March 03, 2003 at 20:15:06:


I have been an owner of a residential property for nearly a year now. The property is worth $140,000 when I got it. I recently got an appraisal and was told that the market value of it is now $175,000. My strategy from the start is to buy and hold. Unfortunately, the property is not performing well as I have hoped. I have been taking lots of money out of my pocket in order to keep it going.

The bottom line is that it is a negatively geared property and I dont feel it is a wise investment after all.

My questions is:

Should I try to make improvements on the property, continually claim depreciation tax and then raise the rents to try improve cash flow and hold on to it while focusing on trying to acquire another property with positive cash flow and then use the extra money coming out of that property to balance out my loss from the other property?


Should I just sell the property and start over again, but this time focus on finding properties with positive cashflow?

Hope someone could give me some advice, I surely need it.

Thanks in advance.

My email is allan_f_cruz@hotmail.com if you have some advice for me.


Two considerations… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on March 03, 2003 at 21:00:25:

The classic “Buy and hold” Stratergy works VERY well if your rental properties can carry themselves, that is; After paying for taxes, insurance, maintenance, and debt service, you have POSITIVE cash flow left over. Acquiring properties in this fashion can allow you to “hold em, rather than fold em”.

Holding on to Real Estate long term is a tremendous way to build an asset base that will produce income for you and your family in future years.

If this property is a “dog” and is costing your money each and every month, you might consider SELLING now, getting your equity out (perhaps doing a tax deferred exchange) and rolling your profit into a better deal that will carry itself.

An alternative statergy is to acquire some “paper” that can be purchased at a discount and will produce additional cash flow to you to offset the negative cash flow that this home is presenting itself to you now with. Over time, yes rents should increase and thus the income from the “paper” can allow you to hold on to this property until it becomes property that WILL carry itself down the road.

To your success,
Michael Morrongiello