What is negative gearing and positive gearing?

The term 'Gearing' is when you borrow money to invest, and it’s typically talked about in the context of investment properties.

The income earned from your investment property is either positively or negatively geared.

A property is positively geared when your rental return (the amount of rent you receive from your tenants) is higher than your interest repayments and other property-related expenses (e.g. strata levies, council and water rates).

A property is negatively geared when your rental return is less than your interest repayments and other property-related expenses.

Sometimes an investment property can be neutrally geared if the expenses and income are equal.

So Positive gearing must be the way to go…..

Actually…. That not entirely correct, lets look at a bit deeper into some of the benefits and the drawbacks.

 

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