Negative gearing is a financial tool not an investment
Made popular in the times of high inflation and no capital gains tax back in the 70's, negative gearing was a way to borrow money to buy more of an investment that was increasing in value.
The aim being, by using one dollar of your money and one dollar of the banks money, as the investment increased in value you hopefully made four dollars when you sold the asset. This would leave you with a profit of two dollars after you pay back the bank instead of just one dollar, had you just used your own money.
Now days the tax and investment environment is a lot different. We have capital gains tax that can bite into profits and inflation is not as high. Care and proper advice should always be taken when considering using such a strategy as it is not a "one size fits all" solution.
Yes, there can be tax advantages and it is still an effective way to acqiure more of an investment in a rising market however, you must do your numbers to ensure you will be in front in the end.
Many people that come to see us see negative gearing as an investment ie They want to buy a negatively geared property instead of looking at it as a financial tool and asking: Whats the best way to buy a property for my own circumstances?
