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Negative Gearing with ANZ
ANZ Bank
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An investment property that costs more to sustain than it generates as income that can't be a good thing, can it? With the right strategy and professional advice, you could learn how to use negative gearing to your advantage.
If the term negative gearing sounds a bit like going backwards, it is not too far from the truth.
Negative gearing is when you borrow a large percentage of the value of an investment property from your lender, for example ANZ, and the amount of rental income paid by your tenants is less than the investment home loan repayments you are making to ANZ. This difference is tax deductible.
In cases where the investment property costs are higher than the income generated by the property, the Australian Taxation Office allows property investors to offset the income produced by their investment property against the cost.
The costs of an investment property vary, but for a property investor borrowing from ANZ, they must cover their ANZ home loan interest charges and account fees, plus general maintenance and repairs expenses.
Negative gearing can be used in the short term to help ANZ home buyers reduce their taxable income, but it should not be used as the primary reason to invest in property.
There are definite risks involved with negative gearing. For example, you need to be sure that you are able to cover the difference between your ANZ home loan repayments and the rental income on your investment property. You also need to consider the likelihood of interest rate rises, which will mean you will have larger repayments to make.
Sometimes the benefits of negative gearing can be outweighed by the risks. Generally, ANZ property investors should not depend on making a considerable profit when it comes time to sell investment, as the property market may have changed since you began your negative gearing strategy, which means it may sell for less than you had budgeted for.
Negative gearing could be of benefit to your financial situation in the short term, but be sure to speak with your financial broker to determine whether it is the right investment strategy for you.
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