Q. Some years ago I obtained an interest only loan to buy an investment property which I still own. It is no longer negatively geared, since the rent received is greater than the monthly payments. What is the best thing to do with a previously negatively geared investment property when it is no longer negatively geared?
A. First of all, congratulations on creating such a successful investment. It is great news that you no longer need to support the property with your own cash.
Potential investors often ask me how long I estimate it will be before they are in your position; this depends on the individual’s circumstances and investment objectives. Most people prefer to have an investment that is paying a dividend, rather than one that is costing them money. After working towards this and once it is achieved, you have investment bliss.
You have a few choices available to you. You can sit back, enjoy the extra income and start paying off some of the loan principal, or you could look at using the surplus income from this asset to do some more borrowing for investment.
In these favourable times of low interest rates and excellent rent yields, I would be leaning towards the latter option, but you need to check with your financial advisor. What is best for you really depends on your age, the type of property you invest in and the number of years until retirement.
I have a number of clients holding positively geared investment properties and most plan to keep them for their future prosperity.
Answers are general comment, and readers should always seek their own independent professional advice.
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Greg Trembath is Principal/Licensee at
Greg Trembath Real Estate.
Licensed Real Estate Agent – Licensed Auctioneer.