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Negative Gearing is one of the most commonly used terms in the world of Australian real estate market. What exactly is negative gearing?
The term gearing refers to the act of borrowing money to purchase an asset, which in this case would be a property. Negative gearing refers to the situation when the income from the property is less than the interest and expenses the property owner is paying on the loan taken to buy the asset. In simple words, negative gearing means making a loss.
Is Negative Gearing All That Bad?
Not necessarily, if you consider the capital gains that the investor gets from the property. Also, negative gearing attracts tax benefits. The interest that the person pays on the loan taken to purchase a property is deductible from taxable income, as are any kind if ongoing maintenance and repair expenses on the property. Also, the losses that the investor incurs is deducted from the taxable income for the financial year; which is an immediate benefit.
In the end, the amount that the investor actually pays on the loan is meager, and most if it comes from the tenants and the tax department in the form of benefits. Also, after a while when the property value appreciates and your loan outstanding decreases, you will enjoy neutral gearing and eventually positive gearing.
Professionals Real Estate at Your Service
Want to learn and understand all about negative gearing and how you can benefit from it? Let the experts at Professional Real Estate help. Contact us on 07 3846 1800 today for more information regarding Negative Gearing.