Whether you’re just starting out on your property journey or have a well-established portfolio, gearing your property in a certain direction can totally change your financial future.

While there are benefits to both positive and negative gearing, choosing the right way to invest in property can be an important factor in determining how much you can expect to make from your investment.

What do the terms positive and negative gearing mean?

Negative gearing means that your property has a negative cash flow after you’ve paid the costs of keeping it. Most investors will be out of pocket after they’ve balanced the income and expenses of owning their properties, but a good portion of it can be claimed back at tax time, and there are usually other benefits and deductions that make it worthwhile.

Negative gearing requires the investor to be able to absorb some medium-term costs in the way of interest payments and lower rental incomes, in the hope of future gains.

Positive gearing is being used more frequently these days by many investors in Queensland property to ensure that their investment property delivers a positive cash flow after paying the costs of keeping it.

In contrast to the long-term potential of negative gearing, positive gearing delivers cash straight into investor’s pockets without them lifting a finger.

Holding a positively geared property for a medium to long term also means that you don’t have to rely too heavily on source of income while the value of your property increases. Positive gearing is obviously an attractive option, but it does depend on the investor finding the right property for their financial strategy.

Are there any benefits to negative gearing?

Negative gearing, or having a negative cash flow from your property after costs, is a good option for those investors looking to offset costs at tax time each year. The difficult part is in waiting for the value of the property to increase enough, so that when it’s sold, the profit is more than all the losses along the way. While

While property is usually a reasonably safe investment, there’s also no guarantee that negatively geared properties will deliver good outcomes in the future. High income earners, companies, and large portfolio investors use negative gearing to decrease their tax bill each financial year, and over time their properties usually increase in value enough to cover their costs.

Negative gearing is encouraged in Australia under our current tax laws, but the investor does need to have the ability to finance the investment Not all investors have the capacity or the inclination to be out of pocket on their investment for a long time.

For those investors who aren’t looking for a tax deduction, and want a positive cash flow from their property, positive gearing is a better option.

How do I positively gear a property?

Purchasing a property for a low price in an area where the demand is increasing can gain you rental incomes that exceed your costs.

High capital growth potential is often the deciding factor in achieving a positive cash flow from your property investment, you obtain the property for a low price, renting it out at equivalent levels to more expensive properties when demand increases in the area. But purchasing a property in an up-and-coming area before the prices rise can often be

But purchasing a property in an up-and-coming area before the prices rise can often be difficult, because they are in such high demand, and you’re competing with other investors. But there are alternative ways to achieve a positive cash flow from your investment property. One of the best ways is to invest in a property designed for dual living. A dual living property is where two homes with separate accesses and utilities exist under the same roof—which means you get two rental incomes from the one property.

Dual living properties are not the same as duplexes though, which is where they get their distinct advantage, they’re on the one title, so there’s only one set of council and water rates to pay while you’re receiving two separate rental incomes. 

Dual living and high capital growth potential

Investing for high capital growth potential is buying a property on the educated guess that the value of the property and its area will rise over a medium to long term.

It’s a good investment method for those investors just starting out, but it does need a fair bit of research. Just because a property is near a school doesn’t mean it’s automatically going to have high capital growth potential.

There are quite a few factors influencing which areas of Brisbane will be the next boom suburb. Relying on the comprehensive research undertaken by property professionals lessens the risk to the investor, because they will closely monitor factors like council plans, infrastructure potential and market movements, to identify the best areas to invest in for high capital growth and positive gearing.

Investors in Queensland property will be wise to use this valuable information to source dual living properties, the combination of the two is a formula for success, and a sure way to achieve a positive cash flow in your property investment.

Always get the best advice

Owning an investment property shouldn’t be a financial burden or a time-consuming and frustrating endeavour. Property experts know how to achieve the best results with the smallest effort and one of the best ways to snap up a positively geared property and achieve a positive cash flow is by buying turnkey homes in an area with high capital growth potential.

Property Queensland’s professional consultants are experienced in navigating market movements, and supplying residential properties with broad appeal in areas with a high potential for capital growth.