A geared investment is a way in which the investor does not use money out of his own pocket, instead borrows a loan to make an investment. Negative gearing occurs when the earnings being made from the investment do not cover the cost. This can happen due to a number of reasons for instance if the property starts to depreciate in value over time or loan interest rates vary or your tenants move out resulting in no rent to pay back the loan. These factors impact cash flow directly however laws regarding negative gearing help reduce the effect of these factors by making it easy for the investor to offset the loss against other income. The resulting income is a reduced one before tax implications take effect on it.

The investor should enter the market with all these things in mind, he should be confident about the investment he will be making, the qualified professionals team at Investec will offer you the best advice so that your property doesn’t lose its worth in terms of capital once you come to sell it.

The strategy of using negative gearing to use will only be sound as long as the investment is also sound and will eventually give you a good return. Investec makes sure your Australian investment decision is made with the knowledge of all these things. It is however also advisable to have sufficient financial reserves to cover any possible periods of losses or to cover up any maintenance or repairs.

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