Negative Gearing vs Positive Gearing

Hi Mr Props,

Welcome to the property forums

Hope you enjoy reading and participating in the discussions in this forum

To answer your question, I think it depends on what a person's goals are and their knowledge and skill base

Many mum and dad  investors choose the negative gearing model because they would like to save tax, and/or because they believe property values will always increase. In order to succeed with this model, the property needs to increase in value more than the amount negatively geared by and inflation.

Personally I would prefer to make money, rather than lose money and save tax (in the hope that the property will increase in value)

Kong

Hi Mr Prop,

The answer is very circumstantial to your situation and also your investment short and long term investment strategy. They both have the pros and cons, e.g Negative Gearing reduces your taxable income but it affects your serviceability and ability to borrow more money and more properties. Whereas Positive Gearing increases your taxable income but also your ability to purchase more properties. You need to sit with someone and go through a strategy that will work well for you. Another consideration is retirement and determining how much income you need to support yourself via positively geared properties.

Shahin Afarin – Property Finance Consultant
http://elitepropertyfinance.wordpress.com/

As people above me have said, Negative gearing is purely reliant on solid capital gains to make any money, so you are relying on the property market increasing for you to make an income. Whereas Positive gearing you will make money as long as your property has a tenant in there.

The effect negative gearing has on your serviceability can also be too detrimental to your investment strategy and due to lack of money, it can leave yourself stalled and having to wait for your property to grow in value to give you enough to move on to your next investment. Whereas positive gearing you can literally purchase a property every day of the week and serviceability should never be a problem. OK maybe I am exaggerating that last sentence a bit, but it is definitely more possible to achieve this than buying negative geared property, where after 1 or 2 properties, you serviceability has reached its limit and you can no longer invest.

Another advantage of positive geared property is that as you increase rents gradually for each CF+ property per year, your income grows by alot too. It's a great long term strategy, and one that I employ as it fits well with my goals and philosophy.

I would prefer making money through property which is passive income, and building a portfolio of CF+ properties in order to be financially free. The goal for many CF+ investors is to continue to get more cf+ properties so that the profits from it replaces their active working income, thereby relieving them from having to work at all. CApital gains can still be achieved by cashflow+ properties if you are selective.

I take negative gearing to be quite speculative, whereas with positive geared properties you can take more calculated risks as the numbers today will inform you whether or not you are making a worthwhile investment.

Hi , Ive been in the game for over 30 years , I always look for positive cash flow , other wise Im  looking for other money to fund something that is costing me cash. I still claim all the tax deductions I can. Id rather be paying some ( minimised tax) than trying to find cash to prop things up.Check out commercial as well ,  can be easy to find properties that are cash flow positive from day one.

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Cheers

Jamie

so i guess they used them for capital gains or flips? negative geared investing tend to be really good for those who already have high incomes. Did they have high paying income jobs already?

They still have them and have seen large growth in their values and rents. I couldn't honestly answer if they were high income when they started.  I don't think they were low income but they were convinced that inner city was the way to go and weren't yield focused. So just saying that high rental yield investing is fine, but it doesn't mean that other styles are wrong either.