Negative gearing is a common investment strategy in Australia and there are some major advantages
to investing in property using the negatively geared strategy. I'm going to cover five advantages
of negative gearing in today's episode.
Hi, I am Ryan from onproperty.com.au, your daily dose of property education and inspiration.
Negative gearing is an extremely common investment strategy in Australia and positively geared
properties are actually much harder to find in Australia than they are in other countries.
So, what are some of the advantages of negative gearing and should you consider it as an investment
strategy?
Advantage number one of negative gearing which is probably the reason why most people choose
to go down this path is that you can target high growth areas. Australia is very much
a growth market, meaning that even if you invest in positive cash flow property, chances
are that you want to achieve some capital growth in order to get the great return on
investments that you desire. Because negatively geared properties are basically everywhere,
you basically have free rein over all of Australia and you can choose top target areas that have
high growth potential so that you can get that capital gains growth.
Another benefit of negative gearing is the tax benefits that come with it. Now I'm not
a tax accountant, so I can�t give you taxation advice, always see your accountant before
doing anything tax-related, but with investment property and with negatively geared property
you are able to claim the loss of that property, plus any losses occurred through depreciation
against your income and you may be eligible for a tax refund. So there is some tax benefits
to investing with negatively geared property, which means you don't lose as much money every
single month as you're paying out, or in some circumstances due to the tax refund you may
actually get more back than you payout, making a negatively geared property a positively
geared one. Again, always speak to your tax accountant before doing anything tax-related.
The third benefit of investing using negative gearing is that you can purchase property
in more stable and predictable areas. A lot of positive cash flow properties are found
in regional centers, regional areas or mining towns or the other types of properties that
aren�t as desirable to every single person, but with negative gearing you can target the
properties that everyone in an area wants that are highly desirable and you can easily
go after areas like major capital cities that will probably be more stable in terms of pricing
because there is such a large demand for housing.
The fourth benefit of negative gearing is that if you actually achieve the capital growth
that you want, there is the opportunity to leverage against that in order to get logic
returns and to expand your portfolio, so as you probably go up in value it may be possible
to borrow against that increased value in order to use that as a deposit on another
property and expand your portfolio without actually injecting anymore cash into these
investments.
Benefit number five is the opportunity to add value almost instantly through things
like renovations or subdivisions or a bunch of different other ways to add value to a
property. But by purchasing a negative geared property that might be rundown or might have
been on the market for too long and therefore you got a great deal you might have the potential
to increase value on that property by doing some hard work and making that property more
appealing to your target market.
So negative gearing is a very common investment strategy and there are some major advantages
to it. I still love positive cash flow property and I think I always will because for me,
passive income and financial freedom and being able to do what I want with my time is the
most important thing. If you want to learn more about investing in positive cash flow
properties; want to learn how to find them; how to research an area and also be equipped
with the tools to analyze property, then you might be interested in On Property Plus which
is my premium membership website. Membership starts at just 20 bucks a month; you can check
it out by heading over to on www.onproperty.com.au/plus . So go ahead, check it out right now, tap
it in, check it out.
Until tomorrow, remember that your long-term success is only achieved one day at a time.