Positive Geared Property: Must-Read Guide for Investors

A positively geared property is a real estate investment where the rental income exceeds the costs associated with owning and managing the property. These costs include mortgage payments, maintenance fees, insurance, and property management costs. Positive gearing is highly attractive to investors because it provides immediate cash flow, allowing them to earn income from the property without needing to wait for long-term capital growth. This strategy contrasts with negatively geared properties, which require the investor to cover ongoing losses in the hope that the property’s value will increase significantly over time.

What Does Positive Gearing Mean?

A positive geared property generates more income than it costs to maintain. Essentially, after covering mortgage repayments, maintenance fees, and any other related expenses, you are left with a profit. This type of property offers a steady stream of cash flow, which can be reinvested, saved, or used to pay down other debts. The key characteristic that defines positive gearing is that it turns your property into a source of immediate income, rather than a long-term speculative investment.

However, there are some downsides to positive gearing. The income generated from the property is taxable, which means you will need to pay tax on the additional rental income. Additionally, positively geared properties are often located in areas with less capital growth potential compared to negatively geared properties, which are typically found in more desirable growth areas. Therefore, while positive gearing offers short-term financial benefits, it may not result in the same long-term gains.

How to Identify a Positive Geared Property

Several factors determine whether a property will be positively geared. First, look at the rental yield—the percentage of the property’s value that is returned as rental income. A high rental yield relative to the purchase price is a strong indicator of positive gearing potential. Additionally, properties with lower purchase prices are more likely to be positively geared, especially when located in areas with strong rental demand. Interest rates also play a major role; lower interest rates reduce your mortgage repayments, increasing the likelihood of a property being positively geared.

Another key factor is the property’s maintenance costs. Older properties with high repair and upkeep needs may eat into profits, making it harder for the property to be positively geared. Therefore, it’s important to choose properties that are relatively low-maintenance, or at least ensure that repair costs won’t drastically reduce your rental income. Dual-income properties, such as a home with a granny flat, can also help you generate more income from a single investment.

Tools and Strategies for Finding Positive Geared Properties

To find positively geared properties, you can use various research tools and strategies. Online property platforms often provide filters to help you identify properties with high rental yields or in emerging suburbs. Property yield calculators are also invaluable, as they allow you to input key figures like purchase price and rental income to determine whether a property will be positively geared. Furthermore, industry reports from sources like CoreLogic or SQM Research can provide data on rental trends and property prices in different regions. Take a look at this article on the best suburbs to invest in (based on highest rental yields) to find areas with positive geared properties.

In addition to using these tools, consider targeting specific types of properties and markets. Properties in regional areas or up-and-coming suburbs tend to have lower purchase prices while maintaining strong rental demand. Another strategy is to explore alternative property types like student housing or short-term rentals, which often command higher rental rates. By diversifying your search, you increase the likelihood of finding a positively geared property that fits your investment goals. 

For a more detailed and personalised approach, consider using a buyer’s agent who specialises in investment properties, such as EE Buyers Agent, to help you navigate the complexities of finding the right location. Fill out the form below to get in touch now.

Locations to Target for Positive Gearing

Certain areas are more likely to have positively geared properties due to their unique market conditions. Regional towns, for example, often have lower property prices but strong rental demand, particularly if they are near industries like mining or tourism. These areas tend to offer higher rental yields, making it easier to find a positively geared investment. Suburbs on the fringes of major cities may also offer opportunities, especially as demand for affordable housing continues to grow in metropolitan areas.

It’s important to consider future growth potential when choosing a location for a positively geared property. While some regional areas offer excellent short-term rental yields, they may not experience significant capital growth over time. Balancing short-term cash flow with long-term appreciation is key to maximising your investment returns. 

Financing Options for Positive Geared Properties

Financing your investment can have a significant impact on whether the property becomes positively geared. Interest-only loans can reduce your monthly mortgage payments, increasing your chances of generating a positive cash flow. However, principal-and-interest loans may still be preferable for investors looking to build long-term equity while maintaining manageable cash flow. Government schemes that support regional investments or first-time investors can also provide financial benefits that make positive gearing easier to achieve.

Additionally, it’s essential to carefully assess the deposit required and the loan structure before purchasing. Low-deposit investment loans may help you enter the market, but they can also come with higher interest rates, which can reduce your cash flow. A well-structured loan, secured with the help of an experienced mortgage broker, can greatly improve the likelihood of achieving a positively geared property.

Conclusion

Investing in a positively geared property offers an excellent opportunity for those seeking immediate cash flow from their real estate investments. By focusing on high-yield areas, using the right research tools, and securing the appropriate financing, you can significantly improve your chances of success. For expert guidance in finding the right positively geared property, consider working with EE Buyers Agent, who specialises in identifying and securing investment properties that generate strong rental returns.