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I was reading a great article in the Property Observer and I thought that I would write a blog about Why would you want Negative Gearing?

First we need to know what negative gearing is. I like how Kevin Lee states in his article for the Property Observer. It is below:

In a nutshell, negative gearing is where you lose money month in month out – because you believe the value of the property will increase sufficiently over the short term, to offset those monthly losses.

Some people with high incomes (over $100,000+ per year) have used negative gearing to buy investment properties to offset their incomes and receive tax benefits.

While this may be good, the same problem remains where nore money is going out of your pocket and you need to continue in your job to keep it, hoping the value will rise in the future.

How can you get out of negative gearing?
– You can create value by selling the house on terms
– You can change your finance on the home which might address negative cash flow
– You could look for ways to renovate to add value to the house.

It would also be good to have a buffer of 3-6 months repayments earning interest in a bank account to account for changes in tenancy, long periods of vacancy, or job loss.

My question is that as this country, and there is only around 3 countries in the world that do this, has negative gearing as a tax minimization strategy…. Why negative gear a property when you can create value from day one and make the property positive cash flow from day one?

If you think that you would like to turn your negative gearing portfolio to positive cash flow, please call (02) 8006 2459.