Positively Geared Vs Negatively Geared

I was out at lunch the other day with a mate of mine who stated “Wealth creation is all fairly complicated and I don’t have the time to figure it out”. I speak to these kind of people often. They are interested in being financially independent but they don’t know how to go about it. I hope to bring a little clarity and simplicity to growing wealth through property.

As the titled states, what is better? A negatively geared property or positively geared property? First things first, a negatively geared property is when a properties rental income does not match the on-going costs and repayments on the investment loan. A positively geared property pays above and beyond the repayments.

Why would anyone want a property that doesn’t cover costs? Put simply, most people do it for minimising tax.

Both strategies have there own merit, unless you have a big tax issue a positively geared property is the way to go. A positively geared strategy allows you to own an investment property and cover a vast majority of the costs with the rental income. That means less time forking out money to support your investment.

The end goal with a positively geared strategy would be to own multiple properties that have little to no debt against them. Once this occurs you could potentially be receiving a good size sum of money on a weekly basis that you won’t have to lift a finger for. Every working person’s dream right?

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