Generally speaking, positive gearing as a strategy is used specifically to generate revenue. Whilst the property may also increase in value over time, this is not necessarily the main aim of the investment. It does however make a very handy benefit to this type of strategy.
One of the most significant advantages of this strategy is that the rental income pays for the entire costs of owning the property. Extra income can therefore be used to pay down the mortgage, to reinvest in the property by way of capital improvements or for you to use to live on or improve your lifestyle. With enough of this type of investment, your oceangoing cruiser, or that classic HSV Club Sport might be looking good.
Some investors consider this type of investment as a poor option since it does not provide tax incentives. The opposite applies in fact. This type of investment requires you to pay tax on the income earned. However, any good property accountant can advise you on ways to minimise tax.
At PPBA, this is a preferred investment option. We consider that if you are paying tax, you are earning money. Negative geared property must lose money to earn tax incentives and growth.
Buy and Hold
Renovation or Flipping
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