A Comprehensive Guide to Positive and Negative Gearing. When it comes to property investment, there are two main strategies you can use: positive gearing and negative gearing. Both have their pros and cons, and it can be confusing to know which one is right for you. In this blog post, we will discuss the basics of positive and negative gearing, so that you can make an informed decision about which strategy is best for you.
Positive gearing
Positive gearing occurs when the income generated from a property investment (in the form of rent) is greater than the costs associated with owning it. In other words, you make a profit every time your tenants pay their rent. This type of strategy works best for investors who don’t mind taking on some risk and can tolerate short-term losses, as the income from rent may fluctuate.
Negative Gearing
Negative gearing involves borrowing money to purchase a property and then renting it out for less than the loan repayments. This strategy works best for investors who can tolerate risk and can wait for capital growth to compensate for the negative cash flow in the short term. While you may have to pay interest on the loan, you can claim a tax deduction for this expense as well as other property-related expenses.
When deciding which strategy is best for you, it’s important to consider your financial situation and goals. Positive gearing may be more suitable if you are looking for a steady income stream and don’t mind taking on some risk, while negative gearing might be better if you want to leverage your capital growth and can wait for the market to turn around.
Ultimately, it’s important to research both strategies thoroughly and consult with a qualified financial advisor before making any decisions about property investment. By doing so, you can ensure that you make the most of your property investments and achieve your financial goals.
No matter what strategy you choose, it’s important to keep in mind that property investment is a long-term game. The best way to succeed is to diversify your portfolio and stay informed about the market. By doing this, you will be well on your way to creating wealth through property investment.
A Comprehensive Guide to Positive and Negative Gearing. We hope this blog post has provided you with an overview of positive and negative gearing and will help you make the best decision for your financial goals. Good luck!
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