Negative Gearing.
Negative gearing occurs when the cost of owning an investment property are higher than the income it generates.
Quick Reference:
Investment Strategy. Offset Property Losses. Risk: Rising Interest Rates.
Expanded Explanation:
In Australia, Investors can use negative gearing to reduce their taxable income. When a property’s expenses, such as loan interest, maintenance or management fees exeed it’s rental income, the resulting loss can be deducted from other income the investor has earnt. This strategy rellies on capital growth over time to make up for short term cash losses. It can be effective when property values rise, but risky if interest rates increase or property prices stagnate.