In real estate investing, a piece of property can either be positively geared or negatively geared. It is, therefore, best to understand what this means before making your investment strategy.
Positive gearing means the income one gains from his or her investment is higher than the interest and other expenses involved. There’s positive cash flow and in this situation, a homeowner can be assured of a steady income and a capital gain if his property increases in value at the time of sale. But while there’s extra money here, the homeowners will need to pay tax on the additional net income.
For some real estate experts, the positive gearing strategy has lower risks, particularly when the rent covers the costs from the start. With this option, cash flow is positive and self-funding and the strategy does not depend on capital gains in the long term. Another advantage of this method is that it can mitigate the risk when it comes to tax breaks because the investor can enjoy tax savings.
Should You Invest in Positive Geared Properties?
There is no assurance that positive geared properties make good investments. This is because the value of a particular investment depends on the property buyer and his or her financial goals.
A major advantage of positive geared properties is the passive income they can generate which can add to your existing income. With extra funds, you can now buy more properties that can give you more income moving into the future. For those with rental properties, the rent you collect over time can help you pay your mortgage repayments.
Positive cash flow properties can also generate capital gains. Whether they are in the regional areas, in the inner city locations or in the suburbs of capital cities, they can have good capital gains over time.
To ensure positive gearing for your property, here are things you can do. Make sure that you buy in areas near your home so you can monitor and manage it well. Be aware of all the expenses involved to avoid the risk of losing money. Choose a reliable rental manager to oversee your property and don’t overprice your rental rate to avoid the risk of vacancy.
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By Wendy Chamberlain
Copyright 2018 | All Rights Reserved
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With a passion for all things real estate spanning over 20 years, Wendy loves that her role as a Buyers Agent or Sellers Advocate gives her buying and selling clients an experienced voice they can trust when it comes to negotiating to buy or sell something as important as their home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. Get in touch today via www.wendychamberlain.com.au for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner.