One of the most common questions amongst property investors is whether to positively or negatively gear their property portfolios.
Positive gearing refers to properties in which the annual rental income exceeds the loan repayments and costs to return an annual cash profit. Negative gearing, on the other hand, refers to properties in which the annual rental income is less than the loan repayments and costs, resulting in a short fall.
There tends to be more capital growth – or an increase in the overall value of the property – potential in negatively geared properties, while the cash flow you’ll receive from positively geared properties can help build your portfolio.
Depending on your financial position, there are varying advantages associated with both types of investments. Allied Business Accountants can offer valuable advice about how each strategy will effect your tax situation and implement tax minimisation strategies that will take your property portfolio to the next level.