Negative Gearing
What is Negative Gearing?
Negative gearing is a form of provide possibility in which a speculator acquire money to buy an asset, but the income generated by that asset does not cover the interest on the loan. Negative gearing strategy can only make a profit if the asset raises so much in price that the capital gain is more than the sum of the on-going losses over the life of the possibility
Negative gearing extend immediate tax profit coupled with the longer term prospect of an growth in investment value. For these reasons it’s a more common choice for property speculators and/or those with hefty tax obligations.
Example of negative gearing
Rental Income: $ 2,000.00
Fewer expenses:
Interest, maintenance, etc. - $ 2,500.00
Council rates & other expenses - $ 240.00
Building allowances (depreciation) - $ 150.00
Total shortfall: – $ 890.00
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