Latest Market Statistics
Read Now
News

Negative and Positive gearing explained.

By Kim Wakelin

Negative and Positive gearing explained. What does all of this mean?

How do they differ and which is right for your investment property? Let’s find out.

Positive Gearing 
When your total rental income is MORE than the cost of owning and managing the investment property (loan repayments, interest, maintenance, management fees, etc). To put it simply, it puts money into your pocket.

For example:

Your investment property brings in $550 a week in rental income and your property expenses are $490 a week. This means you make $60 a week from your investment.

Negative gearing 
Opposite to positive gearing, it’s when your total rental income is LESS than the cost of owning and managing the investment property (loan repayments, interest, maintenance, management fees, etc). Leaving you to make up the difference in payments.

For example:

Your investment property brings in $550 a week in rental income and your property expenses are $570 a week. So you need to put forward an additional $20 each week to cover the costs.

So which is right for you?
Positive gearing allows you to have an increased income and generally won’t put you out of pocket. However it’s important to note you may be taxed on any additional cash from your investment.

With negative gearing you can claim tax deductions on expenses related to owning your investment property. The capital growth on the property will also eventually outweigh the expenses as the property grows in value overtime.

There are pro’s and cons for both situations so it’s important to get some advice on which one is better suited to you and your needs.

This article was supplied by Bruce Patten, International Mortgage Broker of the Year 2006 – 2017.  Bruce is always on hand to answer any questions you may have about loans or anything else around the loan process. Feel free to get in touch with him anytime via phone (021 661 114) or email (bruce.patten@loanmarket.co.nz).

Up to Date

Latest News

  • Donate and Become a Night Knight

    This is your chance to become a Night Knight, as Ronald McDonald House Charities New Zealand is on a mission to raise more than $150,000 for struggling families. All Families need to be together and not worry about where to sleep or where their next meal will come from. If … Read more

    Read Full Post

  • A Little Ray of Giving

    Over 400 families will spend Christmas at a Ronald McDonald House while their child is in a hospital away from home. Drop a present into our office from 29th November to 17th December and we’ll make sure it gets to a deserving family. A little Ray of Giving is a … Read more

    Read Full Post