Understandably, there is a lot of hype around negative gearing. It is a highly beneficial investment strategy, after all.
The question that I want to address today is whether negative gearing is always the best way to structure your invest property.
Positive gearing can make sense in some circumstances, too.
Not long ago, I had a client come in to talk to me about the advantages and disadvantages of positively gearing some regional investment properties. This particular gentleman thought he had a pretty good strategy already worked out for himself.
However, a number of people had told him that he really needed to be looking at negative gearing. They said that if you’re buying investment properties, you really need them to be negative geared to give you the most advantages.
Of course, that does works fantastically for a lot of people. It works particularly well for those who are high income earners and looking for their tax breaks. It is also typically better for investors who are younger and have more time to realise the capital growth in their properties.
Although, this particular gentleman was no longer working and there simply wasn’t any tax advantage for him to negatively gear a property. He was looking to generate an income stream, and that is not something that you get from negative gearing.
As his property tax accountant, I was able to allay his fears and let him know that his strategy was the right strategy for him.
Negative gearing is not always the way to go.
Negatively geared properties are a brilliant investment strategy for thousands of Australians. However, despite their hype, they are not necessarily the best tactic for you.
It works for some, but it doesn’t work for everyone.
Ultimately, you should be engaging with a trusted property tax accountant before making any decisions on investments. We can guide and advise you on the best strategies to suit your unique situation and desires.