The Positives of Negative Gearing

There are not too many negatives about negative gearing, but that doesn’t mean it will work for everybody in all cases.  

Negative gearing occurs when the income from an investment is less than the costs associated with that investment.

The classic example is when an investor buys a property. It’s rare for a property to be bought outright. Most likely they will need to borrow to finance the investment, a practice referred to as gearing. While gearing means any gains will be amplified, so will any losses.

And it is worth noting that property can lose value just like shares. Buying at the top of the market may mean that an investor can have a long wait to see any capital growth.

Negative gearing should not be the aim of an investment but rather a means to an end. You need to make a good investment in the first place. If the property doesn’t increase in value over time, then it’s likely you’ll be out of pocket overall.If you would like to discuss negative gearing in the context of your overall investment strategy, please give us a call. It could be a positive move.