Positive Gearing

Positive gearing is where the income from a debt-financed asset exceeds the interest cost. This is actually quite rare in property investment, and especially in residential property investment (commercial property tends to have higher rental yields, so positive cash flow is not as hard to achieve in that sector).

In residential property, positive gearing more typically happens when the amount borrowed is well below the purchase price. This obviously reduces the amount of interest payable on the debt.

 

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