You might have gone through a property buzz word “negative gearing”. It basically means borrowing money to buy an asset. If you have taken up a loan to buy a property, you are most likely to make a loss with negative gearing. It means that the interest you are paying on the loan is more than the income thus making a loss for you. But there is some positivity in negative gearing. It is going to work wonders for you if the money you make from the capital growth is greater than the loss that you make in the rental crisis. Thus, it usually occurs when the costs of taking out and maintaining an investment are greater than the income that you receive from it. You can then make use of your investment loss and pay less tax.
Negative gearing generally triggers net rental loss. Just consider that you have borrowed money to buy a property, renovate it and then cover the maintenance costs. But later on, you came to know that the annual rental income that you have generated from your investment is less than the expenses while purchasing and maintaining the property. Although it is a loss, but you can enjoy the benefit just by offsetting it against the income that you have earned from other sources. Therefore, it allows you to still make a long-term profit on the investment specially when the value of the property becomes greater than the outlay costs.
Negative gearing is a great deal to transform a negative into a positive. It is a quite popular strategy among the investors in Australia. Negative gearing allows them to take advantage of the short term loss. Moreover, it also encourages people to invest in while avoiding the tax rather than having the aim of achieving the best possible return with lower possible risk level.
