Briefing our clients on various investment strategies and techniques is something that we at DPN excel at. We know that our investors bring different levels of real estate and property knowledge to the table, so we’re sure to utilise our experience in the fields of real estate, finance and insurance (among others) to educate investors. One investment method that is widespread throughout the investment community – but not always fully understood – is negative gearing, which refers to managing a property at a financial loss. What makes this technique so misunderstood is that investors initially think that if one of the properties in their portfolio isn’t making them more money than they’re spending then it should be dropped. However, tax offsets can be claimed on real estate that you’re making a loss on – and these offsets can contribute towards you paying less tax. In some ways, negative gearing is a method of allowing the tax department to help you fund your investment in a property.
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How is losing money considered a wise investment strategy?
Of course, as with all property tax-related issues, there is much more than meets the eye here than simply receiving money from the government if your property operates at a loss. The process of gearing property negatively is dependent upon every factor that affects how much money a property makes – its rental yield, property value and associated assets, among other aspects. At DPN, we use an advanced investment property calculator to consider how the acquisition of negatively geared investment properties could affect both your portfolio and factor into to your long-term financial plan.
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Depending on your short-term and long-term goals, relying too heavily on property that’s geared negatively could end up losing you money – so our professionals will ensure the gearing of your portfolio suits your best interests with thorough consultation. When we know if you would like to reduce your taxable income in the short-term or retire early in the long-term, we can take into account the value, reliability of revenue and location of your current portfolio and see if switching to negative, neutral or positive gearing would help you.
It’s important to note that our negative gearing advice comes without cost or obligation as part of our free Property Investment Plans. When you consult with DPN, we consider every possible strategy you could take when investing in property and empower you to make an informed decision regarding the growth and development of your portfolio.