Rise High Investor Weekly Video #45 – Positive gearing versus negative gearing

Positive vs. Negative Gearing: What You Need to Know

Negative Gearing

Negative gearing happens when your property expenses exceed the income it generates, creating a loss. While this might sound unfavorable, there’s a benefit: you may be eligible for a tax deduction on that loss, which can reduce your taxable income.

Positive Gearing

Positive gearing is when your property income is higher than its expenses, generating a profit. This is great for cash flow, though you’ll need to pay tax on the profit.

Which is Better?

• Short-Term: Negative gearing can be beneficial during your working years if you’re in a high tax bracket, as the tax deductions help offset your income.
• Long-Term: The ultimate goal should be a positively geared portfolio. This provides steady income to support your lifestyle, especially in retirement.

Your Path to Financial Freedom

Both strategies have their place, but building a positively geared portfolio ensures financial independence in the long run. Focus on properties with strong growth potential and take steps to optimize your income and expenses.