Bali Expat Forum - Bali Travel Forum

harro..you sound like my father and he was a wise (and wealthy) man and that is how i live, no debts, no negative gearing !

I think my original question has gotten lost.

I was not trying to buy anything to take away from the Balinese, i think Ken has answered
in favour of my intention.

Sorry Chilli,

I disagree, I don't think Harro sounds particularly wise.

Sure some people live free of debt and I'm not knocking that, but some people also live a very mediocre existence because they believe in no leverage and never utilize the banks money to grow their personal equity.

This statement is also rubbish; complete rubbish:

Truly wealthy people negative gear nothing!

Negative gearing is a means of offsetting your taxable income with a 'paper-loss' from an investment property. If there were no possibility of capital gains your assumption may have some more validity, but negative gearing relates to the income-expense aspect of holding a property. An example, one may negative gear an investment property for for 5 years or so, after which they sell it and make a capital gain. Their net position has benefited from the leverage and that leverage also allowed them to write down other taxable income.

Might wish to speak to a financial advisor or at least an accountant before you arrive at such rediculous conclusions.

Ct

hi Balilife, i love that you care and share.

I have spoken to enough accountants and financial advisors to last me 3 lifetimes.

I understand too well about negative gearing.

With interest rates these days, real estate prices dropping (look at what is happening in the U.K and U.S.A), then you have capital gains taxes to pay,
credit crunch/sub prime crisis (and its going to hit more than just U.S.A). the monetary paper money as we know it collapsing, everyone borrowing and no one saving.

I prefer safety over speculation these days my friend, I prefer to manage my own money and i do not trust banks either.

buy a bucket/s full of gold and sit on that for a few years.

With interest rates these days, real estate prices dropping (look at what is happening in the U.K and U.S.A), then you have capital gains taxes to pay,credit crunch/sub prime crisis (and its going to hit more than just U.S.A). the monetary paper money as we know it collapsing, everyone borrowing and no one saving.
I prefer safety over speculation these days my friend, I prefer to manage my own money and i do not trust banks either.

Hi chilli - I don't disagree with what you're saying - as you've used the term 'these days'. Harro's statement is rediculous because it fails to recognize a particular period in time. Yes, these days one might not want to bet on the Perth real estate market, but that doesn't mean that it's never a good time to - and likewise just because leverage might be risky today, it may have made a lot of sense 5-7 years ago - in fact it did and people who got in 5-7 years ago don't care too much about the imanent correction as they've already seen extraordinary capital gains.

As for you not trusting financial advisors, planners and bankers - we're in the same boat on that - but that doesn't mean that they're always wrong.

To say that the true wealthy never negative gear/ed as Harro did, is about the dumbest thing I've heard in the 21st century.

Ct

Hey Balilife,
If I was you I would change advisors or accountants immediately as they are bending you over if they are advising you that negative gearing is the way to go!
As a property investor if you do your homework thoroughly you can purchase property using no money of your own and cover all expenses relating to the investment from day one. Either having the property neutrally geared or quite possibly with a positive cash flow is a far more financially savvy approach than to negative gear. Whichever way you try and put it , negative gearing costs the investor his or her after tax dollars to prop up the shortfall between income and expenses. Only fools do this! Why would any sane person use their own money when they don't have to.
And in five years if you wish to sell and reap the capital gain, the profit would have been far greater had you not negatively geared and wasted your own money filling in the gap between income and expenses. Banks love fools who negative gear it keeps them in business!
I'm certainly glad you are not my accountant!!
Some people no brains and happy without em! Sound like you!

I think you've been reading too many publications that are advertised by the magical get rich quick guy at 1.00am in the morning on TV Harro, the guy who says, call in tje next 15 minutes and I'll give you a free copy of my, "No, you're not a loser tape".

This is exactly the type of crap they ramble on about:

you can purchase property using no money of your own and cover all expenses relating to the investment from day one.

Fistly the above is a stretch of the truth, a very large stretch.

Secondly, I'll give a very clear example where negative gearing makes sense you simple minded fool.

John works and earns $100,000 / year - he owns 3 properties, one he lives in, 2 he rents out. Each is worth $200,000 and each has an $80,000 mortgage on it. In this scenario, he maintains a nuetral cash flow position on the 2 rentals. His accountant tells him to refinance the two rentals, taking $40,000 of equity out of each of them. He uses that combined $80,000 of equity to pay his mortgage on his residence completely off. But this subsequently puts his other two properties in a negative cash-flow position. Is he better off? In the original setup he didn't have any negative cash flows and no negative gearing. In the second scenario he has negative cash-flows and can negative gear. The answer is he's far better off doing what his accountant suggested. Why? Because he can't write off the interest payable on his residence against the tax on his $100,000 / year income. By following his accountants advise and establishing a ratio that creates a negative-cash flow on his 2 investment properties, he maintains the exact same amount of mortgage payments, but is able to negative gear the two investment properties to reduce his payable income tax.

This would be applicable in Australia and Canada - in the US, interest on a mortgage for a person's residence has always been deductable, but Americans (until more recently) have had the disadvantage of having to pay capital gains tax on their primary residence, something Canadians and Australians don't have to do. Now Americans have a bracket of tax free capital gains on their primary residence.

If you can refute any of the above two paragraphs with the advise you've been getting from your $9.99 get rich quick booklets, I'm all ears.

I look forward to reading your next post, as soon as you find a way to remove your size 14 foot from your gobb.

Ct

By the way Balilife, the statement I previously posted about truly wealthy people not negative gearing anything came from a Warren Buffet financial seminar I attended in N.Y. in 1990 and if it's all the same to you I'll take his advice over yours anyday.
I, personally have purchased 4 properties( 2 commercial and 2 residential) without using a cent of my own money after owning my own home and a considerable share portfolio.
To you it may be a stretch, to me it is reality!
If you wish to negative gear property, go ahead. But like I said before I would rather have that money generating wealth for me in other ways.
I have been involved in the financial industry for 30 years and have recently retired drawing a passive income from my real estate and share portfolio in excess of $250,000 AUD a year.
I am 47 now and happy to have never negatively geared anything!
I think you should stick to arguments on body odour, it's obviously more up your alley.
Get a life Balilife!

You're a hack harro. That last post of yours was pathetic and undoubtebly full of lies.

I've read every berkshire annual report issued by warren buffet, every biography about him and followed him like a crow in my short lifespan, and though I can't suggest he didn't say that, I can almost guarantee you've taken it completely out of context. If you're actually willing to obey and command buffet's every tendency, then you wouldn't be a real estate investor - as he's clearly stated in several forums he doesn't believe real estate is a great investment.

As for you pulling down $250k a year in passive income, I find that about as likely as me finding a guava fruit growing on a paper bark tree. It's also not plausable that you hold the other credentials you lay claim to, knowing as little as you appear to. Were you a janitor in a bank all those years?

I'm 29, worked in the banking / finance sector for 8 or 9 years after graduating, and the only person I ever met who was as clueless as you (judging from your posts) was an undergrad intern who actually wanted to get into web-design but his father made him take a finance major, and in all seriousness he was several pegs up on you. I know my way around real estate so you don't need to blow smoke on that front either - your posts are creeping, no, rather sprinting further and further away from reality.

But what's most unbelievable about your last post Harro is that you tried to completely ignore the example I layed out for you - so why don't you try again:

I want to hear you tell me;

a) how I'm wrong in the example I gave you, or

b) admit to not knowing much on the subject.

So let's hear it harro.. What say you?

Ct

knock, knock,,chilli here..

is it allright to enter ?

(all the tension is wearisome)

Balilife, your example makes sense (on papier), (ive read born free taxed to death LOL) however, i have gone down that "negative gear" route.
I had enough cash to buy a property outright, but was advised (accountant/fiancial advisors) to negative gear, borrow to the hilt, pay upfront interest for one year, bla bla bla, add to this the monthly rental income on that property doesnt cover the loan repayment, so your paying out there every month, added to this the expenses of running the property (i.e. rates, body corportate fees, shire etc) add to this management costs, the maintenance on the property. Then the capital gains tax paid on the sale.

In the end i did my own sums and realised i would have been better off either putting my cash straight into the property (keeping the growth potential and the rental income )OR sitting in fixed term deposit at 8% compounding and just pay the tax on it and be done with all the headaches and makeing everyone else rich.

Add to this that my financial advisor suggested i place my cash into shares/diversified etc, in which i lost 49,000 AUS with the collapse of subprime. i.,e. others used my money to negative gear......

i learn the hard way.

I now consider myself a fringe dweller, living on the outskirts of all these financial games and i sleep sooooooooooooo much better !

Now, perhaps you have structured yourself differently according to what suits your financial life and if this is working for you, great, godspeed to you..

lets try not to argue, we can enjoy it so much if we stick to sharing thoughts, experiences and enrich each other with knowledge. (and a bit of laughter.)

Without deviating too far from the above intriguing discussion from two opposing perspectives (read: string deteriating into a pissing contest....) I would like to revisit one of the initial thread topics, particularly relating to Australians, tax and property 'ownership' in Bali.

A lot has been written on the pros and cons of the leasehold Vs nominee methods for non-Indonesian's to obtain land/house in Bali. Basically i feel it depends on what the intent is - retirement/investment/holiday home etc so it depends on individual circumstances. But more of a concern are the tax implications - there seems to be no tax benefit in declaring any sort of foreign ownership to the Aust. government, and as to alluded to previously, why declare any generated rental income either?

Of course, i expect it depends again on individual circumstances and having a tax 'conscience', but for someone having a holiday house type accomodation they use a couple of months/year and make some sort of rental return during the remainder of the year, do they run a real risk of serious issues with the ATO??

Hi chilli, I don't doubt that it wasn't right for you in that situation.

I am challenging the notion put forward by sir knobnuts that negative gearing is for idiots. In the example I cited, you would be foolish not to negative gear - you'd be donating an unnecessary amount of money to the government.

I await his response.

Regarding the subprime mess, well I won't elaborate, but I also have equities that are down substantially from the fallout - it's the way of the world. anybody who says they foresaw it all and sold out right before is more than likely yanking your chain - people seem to have a tendency of lying about their abilities to manage their money, I guess it makes them feel good about themselves.

Ct

knob... is that like numbnuts ?

I laughed the other morning when i took my 3yr old nephew to early learning centre in Nedlands , the name of the room he plays in is called Numbats..

Regarding the tax implications in Australia (owning foreign property), i am not sure how it works.

I would think that if you are earning any monies overseas technically you should declare it, (tax would obviously want you to declare it) but then if you don't own the property how will the taxtation ever know ? then again, me thinks, that if you cannot claim any negative gear on it, nor any expenses involved, then why should you have to pay tax on it ?

Or, you should probably be paying tax in the country where you are earning that income.
(i.e. Indonesia) .. but if you are not a citizen, how do they know ?

I have dual citizenship,i own a property in europe and because i have a tax file number /citizenship etc in that country, i pay taxes on the rent received (in that country).

ct.. you would know more on this..

Oh Mi Gowd what a lot of fuss. .......I am right.....no I am right and you are an idiot......no I am right and you are a bigger idiot.

Not much point to the discussion if after present your arguement you attack and insult the other.

Wish I had 250K A$ a year income I would retire too........but getting there

This forum is infested with i am right , no I am right Jimbo

often i fear ill get my head bitten off if i make a comment.

There is a moderator,, i think we need a mediator.

Wish I had 250K A$ a year income

Trust me, so does harro..

Ct

I look forward to reading your next post, as soon as you find a way to remove your size 14 foot from your gobb.Ct

I am challenging the notion put forward by sir knobnuts that negative gearing is for idiots

Oh dear, wiping the tears from her eyes, I needed a laugh on a Monday morning. Hey CT, your insults in this string are almost Keatingesque ... any relation?

But on a more serious note, petenjo wrote

But more of a concern are the tax implications - there seems to be no tax benefit in declaring any sort of foreign ownership to the Aust. government, and as to alluded to previously, why declare any generated rental income either?


It's called 'tax audit' petenjo. If you are audited by the ATO (that's Australian Taxation Office for non-Australians reading), they will ask lots of uncomfortable questions about where all that money went when they discover the outgoing cash (for your purchase) had no home.

I agree that I can't see a 'tax benefit' in declaring foreign ownership, why would the Australian government give you a tax benefit for investing your dollars off-shore? However, you could probably stick within the rules if you could work out the expenses against any income so that there was no income to declare. As I've said in my earier posts, you should only be declaring the net income after expense. If expenses exceed income there is nothing to declare - and you can carry forward those losses to future years to offset should you ever go into a positive foreign income position.