PHOTO: Ian Ugarte says investors can create positive cashflow by converting large homes into micro apartments.
Queensland-based developer has created a solution for residential investors battling to service debts because of a sudden drop in income due to COVID-19: convert your single rental property into several.
While negative gearing has been a popular tax-reduction strategy for decades, many investors are facing significant challenges to service their debts in the current crisis.
With a large percentage of renters seeking rent reductions or deferment, investors are being forced to rethink the makeup of their property portfolios, with the tax benefits of negative gearing no longer outweighing the financial burden associated with operating a rental property at a loss.
Small is the New Big founder Ian Ugarte said his company, which is part-developer, part investment educator, had recently experienced a 37 per cent increase in enquiries around positively geared property strategies.
“The biggest realisation is that negative gearing relies on the fact that you need a job to keep it going and those people that have either lost their job or had a decrease in hours are starting to realise that the tax back on the first of July is not making up for the fact that on a weekly basis they can’t afford to live,” Mr Ugarte told Australian Property Investor Magazine.
“Even if they have not lost their job, they realise how quickly things can change overnight, so that’s causing fear and panic in the marketplace.”
Mr Ugarte said while many property owners were considering selling in depressed markets across the country, offloading investments at this time should be a last resort.
Other options included switching to interest-only loan repayments, refinancing loans, reviewing insurance needs and seeking premium relief, or negotiating with agents to reduce letting fees in the short term.
However, Mr Ugarte maintained that the best option available would be to convert properties from negatively geared to positive.
READ MORE VIA API
