What is Negative Gearing

What is Negative Gearing?

Negative gearing is an investment strategy where you borrow money to buy an asset, such as a property or shares, and the income from the investment is used to cover the costs of holding the asset, such as interest on the loan and maintenance costs. The hope is that the value of the asset will increase over time so that when it is sold, the profit made will be greater than the costs incurred.

However, it's important to remember that negative gearing is a high-risk strategy and there are no guarantees that you will make a profit. In fact, if the value of your asset falls, you could end up out of pocket. So, before considering negative gearing, make sure you understand the risks involved and seek professional advice.

negative gearing is a strategy used by investors to minimise their tax liability. It involves borrowing money to purchase an investment asset, such as a property or shares, and the income from the investment is used to cover the costs of holding the asset, such as interest on the loan and maintenance costs. The hope is that the value of the asset will increase over time so that when it is sold, the profit made will be greater than the costs incurred.

However, it's important to remember that negative gearing is a high-risk strategy and there are no guarantees that you will make a profit. In fact, if the value of your asset falls, you could end up out of pocket. So, it's important to do your research and understand the risks before you dive in.

If you're thinking of Negative Gearing, here are some things to consider:

- The costs associated with holding the asset, such as interest on the loan and maintenance costs, can add up quickly.

- There is always the risk that the value of your asset could fall, leaving you out of pocket.

- It can be difficult to find tenants willing to pay enough rent to cover your costs, particularly in areas with high vacancy rates.

- You may have to pay capital gains tax on any profits made when you sell the asset.

So, there you have it! Negative gearing is a high-risk investment