When it comes to investing, there are two main types of gearing: positive and negative. Positive gearing is when you invest in something with the hope of making a profit down the line. This means you borrow money from the bank or from other investors to buy property or shares in a company, and then hope to sell the asset for more than you paid for it. Before making any investment in real estate, you should know about negative gear or positive gear as a strategy, so that you can take the right decision.
Negative gearing is when you invest in something with the hope of losing money. You borrow money from the bank or from other investors to buy property or shares in a company, and then hope to sell the asset for less than you paid for it.
There are pros and cons to both types of gearing. On one hand, using positive gearing can help you get your foot in the door of the market since you're starting off with a lower purchase price. This can give you an edge over competitors who might not have as much money to invest. Additionally, using negative gearing can help offset some of your initial investment costs, which can make investing more affordable overall.
However, there are also disadvantages to using positive and negative gearing. For example, if interest rates rise (as they inevitably will), borrowing money to invest in property or shares may become more expensive, which pushes up the cost of investing.
Similarly, negative gearing can help to make your investment more affordable overall, but it could also reduce your overall return on investment (ROI). The best way to work out whether using positive or negative gearing is right for you depends on your personal situation and what kind of property you're looking for.