Generally speaking, a good long term strategy for investing in property, is balance.
For instance, if you have some negatively geared properties
in your portfolio, you should also aim for some positively geared ones as well.
Negative gearing is where the costs of owning the property
are more than the rental income being produced.
The strategy here is to wait for capital growth and sell it
for a profit.
The benefits of negative gearing are that you claim your
losses on tax but it also means a potentially tighter cash flow, as you have to
wear the costs of owning the property.
Positive gearing on the other hand is where the rental
income is more than what you pay in expenses.
The benefits of positive gearing are that not only do you
have more cash at your disposal but that it also increases your future
borrowing power, if you want to expand your portfolio.
The main drawback of positive gearing is that the ATO will
take a slice of your rental yield but cash flow positive properties can actually
help keep your portfolio in check, by covering any losses you incur on any
negatively geared investments in your portfolio.
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Tuesday, 17 September 2019