What is negative and positive gearing?

Now in many cases, the costs of owning that property including rates, insurance, repairs and loan interest, add up to more than the annual rent earned, meaning the investor is left with a loss each year. In this case, the property is ‘negatively geared’. Many investors are comfortable with this situation because they believe the property will increase in value over time, leading to an overall gain when they sell it.

In addition, at tax time that annual loss can normally be offset against regular wage or salary income. This can reduce your total tax bill, potentially making a negatively geared property very tax-friendly. But not all investment properties are negatively geared. Some rental properties can generate annual rent that adds up to more than the costs of owning the place.

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