Negative gearing can seem counter intuitive to property investing mainly because instead of the property making the investor money, it’s costing them money to keep.
Then why would investors choose to negatively gear a property?
Tax benefits.
Under current Australian tax laws, the losses an investor makes against their investment property may be claimed as a tax deduction from their taxable income.
Then how do they benefit from the investment property?
Capital growth.
When the property market is doing well, the growth in value that the property achieves can outweigh and compensate for the potential losses the investor has recorded.
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