Are you losing money on your investment property and convincing yourself it’s for tax benefits? If your goal is to build your investment portfolio, negative gearing could be setting you back on your investment journey, tying up additional funds into your existing properties restricts your serviceability, which is the capability to make mortgage repayments and in turn controls your borrow capacity. If you want to learn more about why to avoid negative gearing, you can watch my previous video in the description below. If your expenses out weight your income on your investment, you are making an overall loss, some use this strategy to negate the amount of individual tax, and if that’s your goal this is strategy is a good way of doing so. However, if you want to grow your investment portfolio, having negative cashflow can hinder your serviceability on paper, causing banks to limit your borrowing capacity which may prevent you from buying your next investment. If you’ve already got an investment property that’s negatively geared, let's break down the contributing factors and find areas that could turn it into a positively geared property. Basically, all we want here is for your income from your investment property to be higher than your expenses generating a positive cashflow, firstly, let’s talk about outgoings. Interest repayments on your mortgage are going to be your biggest expense, the best way to reduce your interest repayments is to re-finance. If you think you are on a great interest rate and the bank is looking after you because you’ve been a loyal customer of a major bank for the last 20 years, you are most likely overpaying. Visit a mortgage broker, it doesn’t hurt, it doesn’t cost anything, and can even be done 100% online and over the phone, my mortgage broker lives in another state and we have done 3 different home loans without any hassle. Mortgage brokers have access to a wide range of lenders and all their available packages, picking the right one for you, rather than an in-house home loan bank specialist, who is only limited to what they offer and the rates their bank provides. Agency costs are irritating, leasing fees, management fees, administration fees and lease renewals all sound like the same thing to me, just more costs with a different title, not to mention the optional advertising, end of financial year statements, Full-colour floor plan/site plan or leasing boards. Make sure that your agency is always being competitive, there are plenty of agency’s in the market and don’t be scared to shop around between tenant agreements, or become your own property manager. Websites like Cubbi which is a ""Property management platform for owners to seamlessly rent a property without an agent."" Enable you to take control of your own property management without overpaying on agency fees. House repairs often sneak up on you and come at the worst time, although they are sometimes hard to control, there are some things you can do to ensure your repair costs don’t blow out of hand. Your properties should be treated like your cars, if you use good quality fuel, service them regularly, and drive them sensibly they won’t blow up on you all at once. Sticking good tenants in that will look after your property, fixing minor repairs in-between rental agreements and regularly increasing the rental amount should keep the costs at bay. If tenants are asking you for a repair, try making it a win-win scenario, say the gas heater is old and broken and it’s going to cost $500 to repair, go back to your tenants, propose you’ll put a brand new split system in instead, if they are happy to accept a $20 PW rental increase. This way you are adding value to your property while keeping your tenants happy and getting a higher return. Council fees are another ongoing expense that keeps digging away at your profits, there’s not a whole lot we can do here to reduce costs other than ensuring you are paying the correct amount. In Victoria, a property’s rates are calculated by multiplying the valuation of the property by the rate in the dollar. For example, if the value of a property is $250,000 and the council rate in the dollar is set at 0.0042 cents, the rate bill would be $1050 ($250,000 x 0.0042). Your property’s valuation will directly affect your rates. If your valuation increases, your rates will generally be higher, your rate notice will provide specific details on how your rates are calculated. Strata fees don’t impact everyone, but for those of you who are, ensure you are reviewing the full breakdown of the Strata management plan annually, do some research into the costs and don’t be scared to confront body corporate with your concerns. You could even consider becoming a self-managed body corporate, there is no legal requirement for you to engage a strata manager. Now let’s talk about your net rental income and how to increase the money coming in, raising your tenant rental agreement isn’t the only way to increase cash flow, however, if your rental amount is just shy of your expenses, this may be the easy option. If your rental agency isn’t proactively trying to increase your rental agreement, it might be time for you to find a new one, in the meantime, get in contact with your current agency and see what their recommendation and approach is for increasing the rent, don’t be scared to get 2 or 3 rental appraisals from other agents to compare. Granny flats are heavily talked about in the Australian property market, and for a good reason, if you can create a second source of revenue of the existing property, or even subdivide and build a second house off a larger block, you could significantly increase your rental income. Short term stays are the route that we have gone down, specifically Airbnb, this is more of a side business than a passive income, however with a small amount of additional effort you could considerably increase the amount of income generated by your investment property. As always, seek your own professional financial advice for your current situation.

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